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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 20-F
 ANNUAL REPORT PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended: December 31, 2007
 Commission file number 001-14984
 PETROBRAS ENERGÍA PARTICIPACIONES S.A.
  N/A
    
    REPUBLIC OF ARGENTINA(Translation of Registrants name into English)
    
    (Jurisdiction of incorporation of organization)
 Maipú 1, 22 S.S. Floor
(C1084ABA) Buenos Aires
Argentina
 Securities registered or to be registered pursuant to Section 12(b) of the Act:
 Name of Each ExchangeTitle of each Class
    
    On Which RegisteredAmerican Depositary Shares, each representing 10 Class B
    
    New York Stock Exchangeshares
 Securities registered or to be registered pursuant to Section 12(g) of the Act:
  Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
  The number of outstanding shares of each of the issuers classes of capital or common stock as of December 31, 2007 was:
  Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of
the Securities Act.
 Yes þ No o
 If this report is an annual or transitional report, indicate by check mark if the registrant is not
required to file reports pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934.
 Yes o No þ
 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the Registrant was required to file such reports) and (2) has been subject
to such filing requirements for the past 90 days:
 Yes þ No o
 Indicate by check mark which basis of accounting the registrant has used to prepare the financial
statements included in this filing:
 U.S. GAAP o IFRS o Other þ
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of accelerated filer in Rule 12b-2 of the Exchange
Act. (Check one):
 Large accelerated filer þ Accelerated filer o Non-accelerated filer  o
 Indicate by check mark which financial statement item the Registrant has elected to follow:
 Item 17 o Item 18 þ
 If this is an annual report, indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).
 Yes o No þ




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TABLE OF CONTENTS
 Items 1-2. Not Applicable
    
    
    2Item 3. Key Information
    
    
    2Selected Financial Data
    
    
    2Exchange Rates
    
    
    6Risk Factors
    
    
    7Item 4. Information on the Company
    
    
    18Our History and Development
    
    
    18Business Overview
    
    
    19Oil and Gas Exploration and Production
    
    
    22Refining And Distribution
    
    
    40Petrochemicals
    
    
    45Gas and Energy
    
    
    48Insurance
    
    
    57Patents and Trademarks
    
    
    57Quality, Safety, Environment and Health
    
    
    58Regulation of our Business
    
    
    61Organization Structure
    
    
    84Property, Plant and Equipment
    
    
    86Item 4A. Unresolved Staff Comments
    
    
    86Item 5. Operating and Financial Review and Prospects
    
    
    87Overview
    
    
    88Factors Affecting our Consolidated Results of Operations
    
    
    89Discussion of Results
    
    
    101Analysis of Operating Results By Business Segment
    
    
    106Analysis of Equity in Earnings of Affiliates
    
    
    113Analysis of Operating Results by Business Segment
    
    
    116Analysis of Equity in Earnings of Affiliates
    
    
    123Critical Accounting Policies
    
    
    125Liquidity and Capital Resources
    
    
    128Description of Indebtedness
    
    
    132Future Capital Requirements
    
    
    133Off-Balance Sheet Transactions
    
    
    135Contractual Obligations
    
    
    135U.S. GAAP Reconciliation
    
    
    137Reconciliation Tables
    
    
    138Item 6. Directors, Senior Management And Employees
    
    
    140Directors and Senior Management
    
    
    140Compensation
    
    
    146Board Practices
    
    
    147Employees
    
    
    150Share Ownership
    
    
    151Item 7. Major Shareholders and Related Party Transactions
    
    
    151Major Shareholders
    
    
    151Related Party Transactions
    
    
    151Item 8. Financial Information
    
    
    153Consolidated Financial Statements
    
    
    153Legal Proceedings
    
    
    153Dividends
    
    
    154Item 9. Offer and Listing
    
    
    154Offer and Listing Details
    
    
    154Markets
    
    
    155
  i




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Item 10. Additional Information
    
    
    156Memorandum and Articles of Association
    
    
    156Comparison of New York Stock Exchange Corporate Governance Standards
    
    
    161Material Contracts
    
    
    161Taxation
    
    
    162Documents On Display
    
    
    166Item 11. Quantitative and Qualitative Disclosures About Market Risk
    
    
    166Items 12-14. Not Applicable
    
    
    168Item 15. Controls and Procedures
    
    
    168Item 16A. Audit Committee Financial Expert
    
    
    169Item 16B. Code of Ethics
    
    
    169Item 16C. Principal Accountant Fees and Services
    
    
    169Item 16D. Not Applicable
    
    
    170Item 16E. Purchase of Equity Securities By the Issuer and Affiliated Purchasers
    
    
    170Item 17. Not Applicable
    
    
    170Item 18. Financial Statements
    
    
    170Item 19. Exhibits
    
    
    171Exhibit 4.2Exhibit 4.4Exhibit 4.5Exhibit 4.6Exhibit 4.7Exhibit 8.1Exhibit 12.1Exhibit 12.2Exhibit 13.1Exhibit 13.2
   ii




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INTRODUCTION
       FORWARD LOOKING STATEMENTS




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PART I
 
 Items 1-2. NOT APPLICABLE
 
 Item 3. KEY INFORMATION
 
 SELECTED FINANCIAL DATA
    Proportional consolidation of companies under which we exercise joint control
  Changes in professional accounting standards
    2




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Gain (loss)
    
    
    Increase (decrease)Shareholders equity as ofIncome for
    
    
    December 31,2005
    
    
    2004
    
    
    2005
    
    
    2004(in millions of pesos)Comparison with recoverable values (i)
    
    
    (120
    )
    
    
    10
    
    
    
    (190
    )
    
    
    (70
    )Deferred tax (ii)
    
    
    272
    
    
    
    118
    
    
    
    (1,060
    )
    
    
    (1,332
    )Minority interest
    
    
    (36
    )
    
    
    (31
    )
    
    
    303
    
    
    
    339Total effect on unappropriated retained earnings
    
    
    
    
    
    
    
    
    
    
    (947
    )
    
    
    (1,063
    )Deferred loss (iii)
    
    
    
    
    
    
    
    
    
    
    (22
    )
    
    
    (49
    )Total effect on Shareholders equity
    
    
    116
    
    
    
    97
    
    
    
    (969
    )
    
    
    (1,112
    )
 
 (i)
    
    In calculating the recoverability of Property, plant and equipment and certain intangible
assets, the recoverable value is considered to be the higher of the net realizable value and
the discounted value of the expected cash flows. Before the changes in the standards, the book
value was adjusted to its recoverable value if its carrying amount exceeded the undiscounted
value in use. This first comparison has now been eliminated.(ii)
    
    The difference between the inflation-adjusted book value of Property, plant and equipment and
other non-monetary assets and their tax basis is considered to be a temporary difference that
gives rise to the recognition of a deferred liability, which  as provided by CNV General
Resolution No. 487  can either be booked or disclosed in notes to financial statements. The
Companys Management opted to book this effect.(iii)
    
    The effects of the translation of foreign operations net of the foreign-exchange differences
generated by the debt denominated in foreign currency designated as hedge of net investment
abroad no longer classified between liabilities and shareholders equity, and instead, are
classified in shareholders equity. U.S. GAAP Information
     3




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Income Statement Data
 Year Ended December 31,2007
    
    
    2006
    
    
    2005
    
    
    2004(in millions of pesos, except for per share amountsand share capital or as otherwise indicated)Argentine GAAP:Net sales
    
    
    13,458
    
    
    
    11,745
    
    
    
    10,655
    
    
    
    8,763Cost of sales
    
    
    (10,132
    )
    
    
    (8,068
    )
    
    
    (6,851
    )
    
    
    (5,661
    )Gross profit
    
    
    3,326
    
    
    
    3,677
    
    
    
    3,804
    
    
    
    3,102Administrative and selling expenses
    
    
    (1,444
    )
    
    
    (1,277
    )
    
    
    (1,136
    )
    
    
    (967
    )Exploration expenses
    
    
    (172
    )
    
    
    (117
    )
    
    
    (34
    )
    
    
    (133
    )Other operating expense, net
    
    
    (177
    )
    
    
    (135
    )
    
    
    (329
    )
    
    
    (324
    )Operating income
    
    
    1,533
    
    
    
    2,148
    
    
    
    2,305
    
    
    
    1,678Equity in earnings of affiliates
    
    
    176
    
    
    
    219
    
    
    
    281
    
    
    
    102Financial income (expenses) and holding gains (losses)
    
    
    (495
    )
    
    
    (506
    )
    
    
    (899
    )
    
    
    (1,265
    )Other income (expenses), net
    
    
    130
    
    
    
    93
    
    
    
    (459
    )
    
    
    (40
    )Income before income tax and minority interest in subsidiaries
    
    
    1,344
    
    
    
    1,954
    
    
    
    1,228
    
    
    
    475Income tax
    
    
    (494
    )
    
    
    (465
    )
    
    
    (211
    )
    
    
    317Minority interest in subsidiaries
    
    
    (277
    )
    
    
    (425
    )
    
    
    (288
    )
    
    
    (17
    )Net income
    
    
    573
    
    
    
    1,064
    
    
    
    729
    
    
    
    775Basic/diluted Earning per share
    
    
    0.270
    
    
    
    0.501
    
    
    
    0.343
    
    
    
    0.365Number of shares outstanding (in millions):Class B
    
    
    2,132
    
    
    
    2,132
    
    
    
    2,132
    
    
    
    2,132U.S. GAAP:Net sales
    
    
    12,712
    
    
    
    11,085
    
    
    
    10,129
    
    
    
    8,232Operating income
    
    
    678
    
    
    
    1,934
    
    
    
    613
    
    
    
    1,348Net (loss) income
    
    
    (23
    )
    
    
    972
    
    
    
    (77
    )
    
    
    760Basic/diluted net (loss) income per share
    
    
    (0.011
    )
    
    
    0.458
    
    
    
    (0.036
    )
    
    
    0.356
  4




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Balance Sheet Data
 Year Ended December 31,2007
    
    
    2006
    
    
    2005
    
    
    2004(in millions of pesos, except for per share amounts and sharecapital or as otherwise indicated)Argentine GAAP:Consolidated Balance SheetAssetsCurrent assetsCash
    
    
    98
    
    
    
    86
    
    
    
    104
    
    
    
    139Investments
    
    
    1,094
    
    
    
    1,479
    
    
    
    857
    
    
    
    934Trade receivables
    
    
    1,605
    
    
    
    1,438
    
    
    
    1,626
    
    
    
    1,181Other receivables
    
    
    2,473
    
    
    
    1,182
    
    
    
    627
    
    
    
    756Inventories
    
    
    1,182
    
    
    
    888
    
    
    
    782
    
    
    
    627Other assets
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Total current assets
    
    
    6,452
    
    
    
    5,074
    
    
    
    3,996
    
    
    
    3,638Non-current assetsTrade receivables
    
    
    228
    
    
    
    124
    
    
    
    78
    
    
    
    47Other receivables
    
    
    657
    
    
    
    691
    
    
    
    672
    
    
    
    943Inventories
    
    
    100
    
    
    
    81
    
    
    
    79
    
    
    
    71Investments
    
    
    3,270
    
    
    
    3,630
    
    
    
    1,072
    
    
    
    1,107Property, plant and equipment
    
    
    10,609
    
    
    
    10,838
    
    
    
    12,657
    
    
    
    12,277Other assets
    
    
    41
    
    
    
    41
    
    
    
    47
    
    
    
    65Total non-current assets
    
    
    14,905
    
    
    
    15,405
    
    
    
    14,605
    
    
    
    14,510Total assets
    
    
    21,357
    
    
    
    20,479
    
    
    
    18,601
    
    
    
    18,148LiabilitiesCurrent liabilitiesAccounts payable
    
    
    1,867
    
    
    
    1,603
    
    
    
    1,483
    
    
    
    1,181Short-term debt
    
    
    1,922
    
    
    
    2,646
    
    
    
    1,805
    
    
    
    1,709Payroll and social security taxes
    
    
    261
    
    
    
    276
    
    
    
    177
    
    
    
    98Taxes payable
    
    
    242
    
    
    
    331
    
    
    
    228
    
    
    
    215Reserves
    
    
    124
    
    
    
    95
    
    
    
    48
    
    
    
    31Other current liabilities
    
    
    305
    
    
    
    214
    
    
    
    198
    
    
    
    657Total current liabilities
    
    
    4,721
    
    
    
    5,165
    
    
    
    3,939
    
    
    
    3,891Non-current liabilitiesAccounts payable
    
    
    78
    
    
    
    49
    
    
    
    14
    
    
    
    26Long-term debt
    
    
    5,430
    
    
    
    4,716
    
    
    
    5,708
    
    
    
    6,248Other liabilities
    
    
    367
    
    
    
    402
    
    
    
    356
    
    
    
    190Taxes payable
    
    
    1,428
    
    
    
    1,492
    
    
    
    1,404
    
    
    
    1,692Reserves
    
    
    86
    
    
    
    85
    
    
    
    103
    
    
    
    76Total non-current liabilities
    
    
    7,389
    
    
    
    6,744
    
    
    
    7,585
    
    
    
    8,232Total liabilities
    
    
    12,110
    
    
    
    11,909
    
    
    
    11,524
    
    
    
    12,123Minority interest in subsidiaries
    
    
    2,583
    
    
    
    2,350
    
    
    
    1,922
    
    
    
    1,626Total Shareholders Equity
    
    
    6,664
    
    
    
    6,220
    
    
    
    5,155
    
    
    
    4,399Total liabilities and shareholders equity
    
    
    21,357
    
    
    
    20,479
    
    
    
    18,601
    
    
    
    18,148Capital Stock
    
    
    2,132
    
    
    
    2,132
    
    
    
    2,132
    
    
    
    2,132U.S. GAAP:Total assets
    
    
    19,316
    
    
    
    18,017
    
    
    
    16,158
    
    
    
    16,751Shareholders equity
    
    
    6,874
    
    
    
    6,195
    
    
    
    5,233
    
    
    
    5,286
  5




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EXCHANGE RATES
   Argentine peso per U.S. dollarHigh
    
    
    Low
    
    
    Average
    
    
    Period-end2008May
    
    
    3.18
    
    
    
    3.12
    
    
    
    3.15
    
    
    
    3.11April
    
    
    3.18
    
    
    
    3.15
    
    
    
    3.17
    
    
    
    3.17March
    
    
    3.17
    
    
    
    3.15
    
    
    
    3.16
    
    
    
    3.16February
    
    
    3.17
    
    
    
    3.15
    
    
    
    3.16
    
    
    
    3.16January
    
    
    3.16
    
    
    
    3.13
    
    
    
    3.15
    
    
    
    3.16For the year ended December 31,2007
    
    
    3.16
    
    
    
    3.08
    
    
    
    3.12
    
    
    
    3.152006
    
    
    3.08
    
    
    
    3.05
    
    
    
    3.06
    
    
    
    3.072005
    
    
    3.03
    
    
    
    2.86
    
    
    
    2.92
    
    
    
    3.032004
    
    
    2.99
    
    
    
    2.94
    
    
    
    2.97
    
    
    
    2.982003
    
    
    3.37
    
    
    
    2.73
    
    
    
    2.95
    
    
    
    2.942002
    
    
    3.90
    
    
    
    1.60
    
    
    
    3.14
    
    
    
    3.382001
    
    
    1.00
    
    
    
    1.00
    
    
    
    1.00
    
    
    
    1.00
 Exchange controls
    6




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RISK FACTORS
 Factors Relating to Argentina
 Political and economic instability in Argentina has affected and may continue to adversely affect
our financial condition and results of operations.
 sociedad anónima
     The lack of financing alternatives may impact on the execution of our strategic business plan.
   7




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Fluctuations in the value of the peso may adversely affect the Argentine economy, our financial
condition and the results of operations.
     Inflation may escalate and undermine economic growth in
Argentina and adversely affect our financial condition and results of operations.
     8




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Argentina has imposed exchange controls in recent periods that may impair our ability to service
our foreign currency-denominated debt obligations and pay dividends.
     Limits on exports of hydrocarbons and related oil products have affected and may continue to affect
our results of operations.
       9




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Export taxes on our products have negatively affected, and may continue to negatively affect, the
profitability of our operations.
      10




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Price controls have affected, and may continue to affect, our results of operations and capital
expenditures.
  a) Natural Gas and electricity
  Mercado Electrónico del Gas
     11




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b) Downstream margins.
    The Argentine government and our affiliated utility companies are in the process of renegotiating
utility contracts, and the recovery of these affiliates depends on the successful completion of
these negotiations.
     12




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Factors Relating to the Company
 Substantial or extended declines in the prices of crude oil and related oil products may have an
adverse effect on our results of operations and financial condition.
    Our crude oil and natural gas reserve estimates involve some degree of uncertainty and may prove to
be incorrect over time.
            13




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We may not be able to replace our oil and gas reserves and this may have an adverse impact on our
future results of operations and financial condition.
     Our operations could be adversely affected by events beyond our control.
  Our activities may be adversely affected by events in countries in which we do business.
   Venezuela
    14




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Bolivia
   Ecuador
   15




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We employ a largely unionized labor force and could be subject to an organized labor action.
    Our operations run the risk of causing environmental damage, and any changes in environmental laws
may increase our operational costs.
    17




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Item 4. INFORMATION ON THE COMPANY
 
 OUR HISTORY AND DEVELOPMENT
 Our History
       History of Petrobras Energía
    18




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Capital Expenditures and Divestitures
  
 BUSINESS OVERVIEW
 Our Strategy
   
    
    Increasing oil and gas reserves and production, to secure sustainable growth.
    
    Seeking profitability in downstream business in Argentina, through a balanced
crude production  refining  logistics  distribution chain.
    
    Generating energy solutions through the development of businesses in the gas
and energy areas that will allow for capitalizing on the synergies with the natural gas
reserves of the Petrobras group.
    
    Consolidating our leading position in the South American styrenics markets.
    
    Maintaining our financial solvency, while pursuing operating and management
efficiency and the development of human resources.
  
    
    A commitment to protect the quality of our goods and services, the environment
and the health and safety of our employees, contractors and neighboring communities.
    
    Adoption of, and compliance with, corporate governance practices in line with
recognized best practices.
    
    Maintenance of a management style that favors communication and teamwork,
fostered by the value of the people that work in our organization.
    
    Developing new business opportunities in order to maximize potential synergies
and capitalize on complementary business opportunities with Petrobras.
  19




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Our Principal Market
       
    
    Pesification of certain assets and liabilities denominated in foreign currency and held in the country;
    
    Amendment of the charter of the Central Bank authorizing it to issue money in
excess of the foreign currency reserves, grant short-term loans to the federal
government and provide financial assistance to financial institutions with liquidity or
solvency problems;
    
    Pesification and elimination of indexing clauses on utility rates, fixing those
rates in pesos at the P$1=US$1 exchange rate; and
    
    Implementation of taxes on hydrocarbon exports and certain related oil
products, among others.
  20




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OIL AND GAS EXPLORATION AND PRODUCTION
 Overview
  
    
    increasing oil and gas production and reserves by capitalizing on our
experience and presence in nearly all Latin American oil producing countries;
    
    optimizing our investment portfolio by balancing exploration projects with
development projects; and
    
    performing efficient operations under high safety and environmental care
standards.
     Our Oil and Gas Exploration and Production Interests
   22




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Oil
    
    
    Gas
    
    
    TotalGross productive wells (1)
    
    
    5,836
    
    
    
    349
    
    
    
    6,185Net productive wells (2)
    
    
    3,028
    
    
    
    237
    
    
    
    3,265
 
 (1)
    
    Refers to number of wells completed.(2)
    
    Refers to fractional ownership working interest in gross wells.  AverageProducing(1)
    
    
    Exploration(2)Gross
    
    
    Net(3)
    
    
    Gross
    
    
    Net(3)(in thousands of acres)Argentina (6)
    
    
    4,922
    
    
    
    3,201
    
    
    
    18,129
    (4)
    
    
    6,514
    (5)Peru
    
    
    116
    
    
    
    70
    
    
    
    11,548
    
    
    
    5,438Venezuela
    
    
    485
    
    
    
    125
    
    
    
    
    
    
    
    Ecuador
    
    
    62
    
    
    
    54
    
    
    
    714
    
    
    
    637Bolivia
    
    
    56
    
    
    
    56
    
    
    
    
    
    
    
    Colombia
    
    
    81
    
    
    
    24
    
    
    
    
    
    
    
    Total
    
    
    5,722
    
    
    
    3,530
    
    
    
    30,391
    
    
    
    12,589
 
 (1)
    
    Includes all areas in which we produce commercial quantities of oil and gas or areas in the
development stage.(2)
    
    Includes all areas in which we are allowed to perform exploration activities but where
commercial quantities of oil and gas are not produced or areas that are not in the development
stage.(3)
    
    Represents our fractional ownership working interest in the gross acreage.(4)
    
    Includes 14,300 thousand exploration acres in offshore areas.(5)
    
    Includes 4,138 thousand exploration acres in offshore areas.(6)
    
    In December 2007, we notified the provincial authorities of our decision to relinquish 667
gross thousands of acres in Austral and Neuquén basins (647 net thousands of acres).  23




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Year ended December 31,2007
    
    
    2006
    
    
    2005Outside of
    
    
    
    
    
    
    Outside of
    
    
    
    
    
    
    Outside ofArgentina
    
    
    Argentina
    
    
    Argentina
    
    
    Argentina
    
    
    Argentina
    
    
    ArgentinaGross wells drilled:Production:Productive wells:Oil
    
    
    184
    
    
    
    132
    
    
    
    218
    
    
    
    60
    
    
    
    256
    
    
    
    85Gas
    
    
    13
    
    
    
    6
    
    
    
    3
    
    
    
    2
    
    
    
    7
    
    
    
    2Dry wells
    
    
    2
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    2
    
    
    
    Total
    
    
    199
    
    
    
    138
    
    
    
    224
    
    
    
    62
    
    
    
    265
    
    
    
    87Exploration:Discovery wells:Oil
    
    
    5
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    11
    
    
    
    Gas
    
    
    1
    
    
    
    1
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    Dry wells
    
    
    3
    
    
    
    
    
    
    
    4
    
    
    
    1
    
    
    
    
    
    
    
    Total
    
    
    9
    
    
    
    1
    
    
    
    15
    
    
    
    1
    
    
    
    11
    
    
    
    Net wells drilled:Production:Productive wells:Oil
    
    
    79.0
    
    
    
    115.6
    
    
    
    100.4
    
    
    
    57.4
    
    
    
    110.7
    
    
    
    75.2Gas
    
    
    5.2
    
    
    
    5.4
    
    
    
    0.6
    
    
    
    1.0
    
    
    
    2.9
    
    
    
    1.0Dry wells
    
    
    0.9
    
    
    
    
    
    
    
    0.6
    
    
    
    
    
    
    
    1.7
    
    
    
    Total
    
    
    85.1
    
    
    
    121
    
    
    
    101.6
    
    
    
    58.4
    
    
    
    115.3
    
    
    
    76.2Exploration:Discovery wells:Oil
    
    
    1.1
    
    
    
    
    
    
    
    1.7
    
    
    
    
    
    
    
    8.5
    
    
    
    Gas
    
    
    0.5
    
    
    
    0.4
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    Dry wells
    
    
    1.3
    
    
    
    
    
    
    
    2
    
    
    
    0.5
    
    
    
    
    
    
    
    Total
    
    
    2.9
    
    
    
    0.4
    
    
    
    6.7
    
    
    
    0.5
    
    
    
    8.5
    
    
    
    
 Production
 Argentine Production
    24




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##### Table of Contents



25




---



##### Table of Contents



Production outside of Argentina
  Venezuela
        26




---



##### Table of Contents



Peru
     Ley para la
Promoción de la Inversión en la Explotación de Recursos y Reservas Marginales de Hidrocarburos a
Nivel Nacional
   27




---



##### Table of Contents



Ecuador
      Block 18
    28




---



##### Table of Contents



Block 31
     New Regulations
   29




---



##### Table of Contents



Ship or Pay Obligations with Oleoducto de Crudos Pesados (OCP)
    Bolivia
    30




---



##### Table of Contents



Colombia
   Statistical Information Relating to Oil and Gas Production
  Oil and2007 Production
    
    
    GasProduction Areas
    
    Location
    
    Basin
    

Oil (1)
    
    

Gas (2)
    
    
    Wells
    
    

Interest (8)
    
    
    ExpirationArgentina:25 de Mayo
 Medanito S.E.
    
    La Pampa and Río Negro
    
    Neuquén
    
    
    4,913
    
    
    
    3,169
    
    
    
    577
    
    
    
    100.00
    %
    
    
    2016El Mangrullo
    
    Neuquén
    
    Neuquén
    
    
    6
    
    
    
    10,260
    
    
    
    6
    
    
    
    100.00
    %
    
    
    2025Jagüel de los Machos
    
    Río Negro and La Pampa
    
    Neuquén
    
    
    1,030
    
    
    
    2,769
    
    
    
    101
    
    
    
    100.00
    %
    
    
    2015Puesto Hernández
    
    Mendoza and Neuquén
    
    Neuquén
    
    
    3,460
    
    
    
    
    
    
    
    825
    
    
    
    38.45
    %
    
    
    2016Bajada del Palo
    
    Neuquén
    
    Neuquén
    
    
    60
    
    
    
    
    
    
    
    4
    
    
    
    17.9
    %(3)
    
    
    2015Santa Cruz II
    
    Santa Cruz
    
    Austral
    
    
    1,241
    
    
    
    7,855
    
    
    
    71
    
    
    
    100.00
    %
    
    
    2017/2024Río Neuquén
    
    Neuquén and Río Negro
    
    Neuquén
    
    
    503
    
    
    
    6,435
    
    
    
    131
    
    
    
    100.00
    %
    
    
    2017Entre Lomas
    
    Neuquén and Río Negro
    
    Neuquén
    
    
    880
    
    
    
    1,053
    
    
    
    417
    
    
    
    17.9
    %
    
    
    2016Veta
Escondida and Rincón de Aranda U.T.E.
    
    Neuquén
    
    Neuquén
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    55.00
    %
    
    
    2017Aguada de la Arena
    
    Neuquén
    
    Neuquén
    
    
    97
    
    
    
    6,991
    
    
    
    11
    
    
    
    80.00
    %
    
    
    2022
  31




---



##### Table of Contents



Oil and2007 Production
    
    
    GasProduction Areas
    
    Location
    
    Basin
    

Oil (1)
    
    

Gas (2)
    
    
    Wells
    
    

Interest (8)
    
    
    ExpirationSanta Cruz I
U.T.E.
    
    Santa Cruz
    
    Austral
    
    
    2,294
    
    
    
    44,421
    
    
    
    98
    
    
    
    71.00
    %
    
    
    2016/2031Sierra Chata
    
    Neuquén
    
    Neuquén
    
    
    180
    
    
    
    5,639
    
    
    
    41
    
    
    
    19.89
    %
    
    
    2020Atuel Norte
    
    Neuquén
    
    Neuquén
    
    
    4
    
    
    
    
    
    
    
    6
    
    
    
    33.33
    %
    
    
    2015La Tapera  Puesto Quiroga
    
    Chubut
    
    San Jorge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21.95
    %
    
    
    2017El Tordillo
    
    Chubut
    
    San Jorge
    
    
    2,034
    
    
    
    30
    
    
    
    756
    
    
    
    21.95
    %
    
    
    2016Aguaragüe
    
    Salta
    
    Noroeste
    
    
    143
    
    
    
    6,761
    
    
    
    38
    
    
    
    15.00
    %
    
    
    2017/2023Estancia Agua Fresca
    
    Santa Cruz
    
    Austral
    
    
    189
    
    
    
    75
    
    
    
    3
    
    
    
    50.00
    %
    
    

    
    (4)Gobernador Ayala
    
    Mendoza
    
    Neuquén
    
    
    12
    
    
    
    
    
    
    
    6
    
    
    
    22.51
    %
    
    

    
    (4)Total Argentina
    
    
    
    
    
    
    17,046
    
    
    
    95,458
    
    
    
    3,091Outside of Argentina:Colpa Caranda (9)
    
    Bolivia
    
    Sub Andina
    
    
    490
    
    
    
    12,715
    
    
    
    54
    
    
    
    100.00
    %
    
    
    2029Oritupano Leona (5)
    
    Venezuela
    
    Oriental
    
    
    3,107
    
    
    
    
    
    
    
    215
    
    
    
    22.00
    %
    
    
    2025Acema (5)
    
    Venezuela
    
    Oriental
    
    
    239
    
    
    
    831
    
    
    
    26
    
    
    
    33.24
    %
    
    
    2025La Concepción (5)
    
    Venezuela
    
    Lago Maracaibo
    
    
    1,383
    
    
    
    1,480
    
    
    
    74
    
    
    
    36.00
    %
    
    
    2025Mata (5)
    
    Venezuela
    
    Oriental
    
    
    361
    
    
    
    1,901
    
    
    
    48
    
    
    
    34.49
    %
    
    
    2025Lote X
    
    Peru
    
    Talara
    
    
    4,859
    
    
    
    3,691
    
    
    
    2,518
    
    
    
    60.00
    %(6)
    
    
    2024Block 31
    
    Ecuador
    
    Oriente
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100.00
    %
    
    
    2024Block 18
    
    Ecuador
    
    Oriente
    
    
    3,769
    
    
    
    
    
    
    
    32
    
    
    
    70.00
    %
    
    
    2022Tibú
    
    Colombia
    
    Catatumbo
    
    
    
    
    
    
    
    
    
    
    127
    
    
    
    30.00
    %
    
    

    
    (7)Total Outside of Argentina
    
    
    
    
    
    
    14,208
    
    
    
    20,618
    
    
    
    3,094Total
    
    
    
    
    
    
    31,254
    
    
    
    116,076
    
    
    
    6,185
 
 (1)
    
    In thousands of barrels.(2)
    
    In millions of cubic feet.(3)
    
    80% working interest until October 2007, then reduced to 17.9% as a consequence of the
transfer of part of our ownership.(4)
    
    We have filed an application for an exploitation concession with respect to these fields,
which is still pending approval.(5)
    
    Indirect interests through mixed companies operating these areas.(6)
    
    Working interest during 2007 was 100% as the sale of the 40% interest in PVIE was effected at
the end of December 2007.(7)
    
    The first phase finishes in December 2008, while the second phase finishes in December 2009.(8)
    
    Interest through Petrobras Energía and its subsidiaries.(9)
    
    Production from Colpa Caranda block were calculated using the economic method.  Year ended December 31,2007
    
    
    2006
    
    
    2005(average barrels per day)Argentina
    
    
    46,700
    
    
    
    54,233
    
    
    
    54,516Outside of Argentina
    
    
    38,925
    
    
    
    49,181
    
    
    
    67,962Total
    
    
    85,625
    
    
    
    103,414
    
    
    
    122,478
  32




---



##### Table of Contents



Year ended December 31,2007
    
    
    2006
    
    
    2005(average thousand cubic feet per day)Argentina
    
    
    261,529
    
    
    
    250,030
    
    
    
    231,830Outside of Argentina
    
    
    56,487
    
    
    
    54,677
    
    
    
    61,855Total
    
    
    318,016
    
    
    
    304,707
    
    
    
    293,685
  Year ended December 31,2007
    
    
    2006
    
    
    2005Argentina:Oil (in pesos per barrel of oil equivalent)
    
    
    126.3
    
    
    
    124.4
    
    
    
    99.91Gas (in pesos per million cubic feet)
    
    
    4.1
    
    
    
    3.54
    
    
    
    2.74Outside of Argentina(1):Oil (in pesos per barrel of oil equivalent)
    
    
    202.5
    
    
    
    144.3
    
    
    
    94.65Gas (in pesos per million cubic feet)
    
    
    10.84
    
    
    
    10.52
    
    
    
    5.21
 
 (1)
    
    Figures are translated into Argentine pesos at the historic exchange rates, calculated on an
averaged monthly basis.  Year ended December 31,2007
    
    
    2006
    
    
    2005(in pesos per barrel of oil equivalent)Argentina:Lifting Cost
    
    
    17.27
    
    
    
    13.50
    
    
    
    11.05Royalties
    
    
    9.13
    
    
    
    9.42
    
    
    
    7.73Depreciation
    
    
    17.09
    
    
    
    13.91
    
    
    
    12.95Total
    
    
    43.49
    
    
    
    36.83
    
    
    
    31.73Outside of Argentina(1):Lifting Cost
    
    
    11.55
    
    
    
    12.10
    
    
    
    10.03Royalties
    
    
    37.66
    
    
    
    23.72
    
    
    
    8.08Depreciation
    
    
    12.99
    
    
    
    13.91
    
    
    
    13.97Total
    
    
    62.20
    
    
    
    49.73
    
    
    
    32.08
 
 (1)
    
    Figures are translated into Argentine pesos at the historic exchange rates, calculated on an
averaged monthly basis. Exploration
   33




---



##### Table of Contents



Location
    
    Basin
    
    Interest (4)
    
    
    ExpirationIn Argentina:Glencross
    
    Santa Cruz
    
    Austral
    
    
    87.00
    %
    
    
    2032Estancia Chiripá
    
    Santa Cruz
    
    Austral
    
    
    87.00
    %
    
    
    2032Cerro Manrique
    
    Rio Negro
    
    Neuquén
    
    
    50.00
    %
    
    
    
    (2)Parva Negra
    
    Neuquén
    
    Neuquén
    
    
    47.63
    %
    
    
    2001
    (1)Cerro Hamaca
    
    Mendoza
    
    Neuquén
    
    
    39.64
    %
    
    
    2004
    (1)Cañadón del Puma
    
    Neuquén
    
    Neuquén
    
    
    50.00
    %
    
    
    2008Puesto Oliverio
    
    Santa Cruz
    
    Austral
    
    
    50.00
    %
    
    
    2006
    (1)El Campamento
    
    Santa Cruz
    
    Austral
    
    
    50.00
    %
    
    
    2006
    (1)El Cerrito Oeste
    
    Santa Cruz
    
    Austral
    
    
    50.00
    %
    
    
    2006
    (1)Chirete
    
    Salta
    
    Noroeste
    
    
    100.00
    %
    
    
    2010Hickman
    
    Salta
    
    Noroeste
    
    
    50.00
    %
    
    
    2011Rio
Colorado
    
    Salta
    
    Noroeste
    
    
    30.00
    %
    
    
    2010Enarsa 1
    
    Continental Shelf
    
    Offshore Argentina
    
    
    25.00
    %
    
    
    Enarsa 3
    
    Continental Shelf
    
    Offshore Argentina
    
    
    35.00
    %
    
    
    Outside of Argentina:Block 57
    
    Peru
    
    Madre de Dios
    
    
    21.12

%(3)
    
    
    2008Block 58
    
    Peru
    
    Madre de Dios
    
    
    60.08
    %
    
    
    2009Block 103
    
    Peru
    
    Huallaga
    
    
    18.02
    %
    
    
    2008Block 110
    
    Peru
    
    Madre de Dios
    
    
    60.08
    %
    
    
    2009Block 117
    
    Peru
    
    Marañon
    
    
    60.08
    %
    
    
    2008
 
 (1)
    
    We have filed an application for an exploitation concession with respect to this field, which
is still pending approval.(2)
    
    The grant of an exploration permit is still pending as of the date of this annual report(3)
    
    In February 2008, with the approval of the Peruvian Government our interest increased to
27.73%.(4)
    
    Interest through Petrobras Energía and its subsidiaries. Exploration in Argentina
  2 2 2
   34




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##### Table of Contents



Exploration Outside of Argentina
 Peru
       Venezuela
  Colombia
  Ecuador
 force majeure force majeure .
  35




---



##### Table of Contents



Reserves
         36




---



##### Table of Contents



Crude oil, condensate and natural gasliquids
    
    
    Natural gasOutside of
    
    
    
    
    
    
    
    
    
    
    Outside ofArgentina
    
    
    Argentina
    
    
    Total
    
    
    Argentina
    
    
    Argentina
    
    
    Total
    
    
    Combined(in millionsof barrelsof oil(in thousands of barrels)
    
    
    (in millions of cubic feet)
    
    
    equivalent)Total proved developed and undeveloped
reserves as of
December 31, 2005
    
    
    143,833
    
    
    
    394,597
    
    
    
    538,430
    
    
    
    950,863
    
    
    
    379,809
    
    
    
    1,330,672
    
    
    
    760.2Proved developed reserves as of
December 31, 2005
    
    
    98,093
    
    
    
    176,227
    
    
    
    274,320
    
    
    
    457,378
    
    
    
    203,255
    
    
    
    660,633
    
    
    
    384.4Increase (decrease) originated in:Revisions of previous estimates
    
    
    (2,636
    )
    
    
    (186,724
    )
    
    
    (189,360
    )
    
    
    25,264
    
    
    
    (96,042
    )
    
    
    (70,778
    )
    
    
    (201.2
    )Improved recovery
    
    
    38
    
    
    
    4.705
    
    
    
    4,743
    
    
    
    724
    
    
    
    6,830
    
    
    
    7,554
    
    
    
    6.0Extensions and discoveries
    
    
    5,510
    
    
    
    6,900
    
    
    
    12,410
    
    
    
    63,595
    
    
    
    
    
    
    
    63,595
    
    
    
    23.0Purchase of proved reserves in place
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Sale of proved reserves in place
    
    
    (4,541
    )
    
    
    
    
    
    
    (4,541
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4.5
    )Years production
    
    
    (19,795
    )
    
    
    (17,951
    )
    
    
    (37,746
    )
    
    
    (91,261
    )
    
    
    (19,957
    )
    
    
    (111,218
    )
    
    
    (56.3
    )Total proved developed and
undeveloped reserves as of
December 31, 2006
    
    
    122,409
    
    
    
    201,527
    
    
    
    323,936
    
    
    
    949,185
    
    
    
    270,640
    
    
    
    1,219,825
    
    
    
    527.2Proved developed reserves as of
December 31, 2006
    
    
    81,845
    
    
    
    102,735
    
    
    
    184,580
    
    
    
    497,680
    
    
    
    179,884
    
    
    
    677,564
    
    
    
    297.5Increase (decrease) originated in:Revisions of previous estimates
    
    
    (8,766
    )
    
    
    9,380
    
    
    
    614
    
    
    
    (5,348
    )
    
    
    79,904
    
    
    
    74,556
    
    
    
    13.0Improved recovery
    
    
    
    
    
    
    8,864
    
    
    
    8,864
    
    
    
    
    
    
    
    2,027
    
    
    
    2,027
    
    
    
    9.2Extensions and discoveries
    
    
    3,113
    
    
    
    299
    
    
    
    3,412
    
    
    
    168,326
    
    
    
    
    
    
    
    168,326
    
    
    
    31.5Purchase of proved reserves in place
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Sale of proved reserves in place
    
    
    (1,231
    )
    
    
    (39,439
    )
    
    
    (40,670
    )
    
    
    
    
    
    
    (41,595
    )
    
    
    (41,595
    )
    
    
    (47.6
    )Years production
    
    
    (17,046
    )
    
    
    (14,208
    )
    
    
    (31,254
    )
    
    
    (95,458
    )
    
    
    (20,618
    )
    
    
    (116,076
    )
    
    
    (50.6
    )Total proved developed and undeveloped
reserves as of
December 31, 2007
    
    
    98,479
    
    
    
    166,423
    
    
    
    264,902
    
    
    
    1,016,705
    
    
    
    290,358
    
    
    
    1,307,063
    
    
    
    482.7Proved developed reserves as of
December 31, 2007
    
    
    71,927
    
    
    
    79,530
    
    
    
    151,457
    
    
    
    507,140
    
    
    
    188,542
    
    
    
    695,682
    
    
    
    267.4
  37




---



##### Table of Contents



2007
    
    
    2006
    
    
    2005Millions
    
    
    
    
    
    
    Millions
    
    
    
    
    
    
    Millions of
    
    
    % ofof barrels
    
    
    % of total
    
    
    of barrels
    
    
    % of total
    
    
    barrels of
    
    
    totalof oil
    
    
    proved
    
    
    of oil
    
    
    proved
    
    
    oil
    
    
    provedequivalent
    
    
    reserves
    
    
    equivalent
    
    
    reserves
    
    
    equivalent
    
    
    reservesProved developed reserves
    
    
    267.4
    
    
    
    55.4
    %
    
    
    297.5
    
    
    
    56.4
    %
    
    
    384.4
    
    
    
    50.6
    %Proved undeveloped reserves
    
    
    215.3
    
    
    
    44.6
    %
    
    
    229.7
    
    
    
    43.6
    %
    
    
    375.8
    
    
    
    49.4
    %Total Proved Reserves
    
    
    482.7
    
    
    
    100
    %
    
    
    527.2
    
    
    
    100
    %
    
    
    760.2
    
    
    
    100
    %
      38




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##### Table of Contents



Sales
  Year ended December 31,2007
    
    
    2006
    
    
    2005(in millions of pesos)Argentina
    
    
    2,502
    
    
    
    2,694
    
    
    
    2,180Outside of Argentina
    
    
    2,122
    
    
    
    2,087
    
    
    
    2,477Total
    
    
    4,624
    
    
    
    4,781
    
    
    
    4,657
  Oleoducto de Crudos Pesados (OCP)
     Oleoductos del Valle S.A.  Oldelval
    39




---



##### Table of Contents



Competition
  
 REFINING AND DISTRIBUTION
    The refining and distribution business in Argentina
     40




---



##### Table of Contents



Refining Division
  San Lorenzo Refinery
   Ricardo Eliçabe Refinery
   Dock Sud Plant
  Caleta Paula Plant
   41




---



##### Table of Contents



Refining Master Plan
    Distribution Division
    As of December 31, 2007Owned (1)
    
    
    138Franchised (2)
    
    
    542Total
    
    
    680
 
 (1)
    
    Owned or controlled by Petrobras Energía under long-term commercial contracts or other types
of contractual relationships that secure a long-term direct influence over such points of
sale.(2)
    
    The term franchised is used to refer to gas stations owned by third parties with whom
Petrobras Energía has signed a franchise agreement that provides Petrobras Energía with the
right (i) to become the gas stations exclusive supplier and (ii) to brand the gas station
with its corporate image. Current laws establish that the term of such contracts should be 5
years for existing stations and 8 years for new constructions.   Gas Stations
 As of December 31, 2007Petrobras
    
    
    504Eg3
    
    
    146San Lorenzo
    
    
    30Total
    
    
    680
  42




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##### Table of Contents



Year Ended December 31,2007
    
    
    2006
    
    
    2005Production (thousands of tons):Virgin naphtha
    
    
    890
    
    
    
    737
    
    
    
    810Diesel oil
    
    
    1,468
    
    
    
    1,282
    
    
    
    1,226Other products
    
    
    1,532
    
    
    
    1,229
    
    
    
    1,156Sales:Aromatics (thousands of tons)
    
    
    22
    
    
    
    30
    
    
    
    46Benzene (thousands of tons)
    
    
    45
    
    
    
    51
    
    
    
    58Gasoline (thousands of m3)
    
    
    850
    
    
    
    837
    
    
    
    715Diesel oil (thousands of m3)
    
    
    1,949
    
    
    
    1,767
    
    
    
    1,741Other medium distillates (thousands of m3)
    
    
    9
    
    
    
    15
    
    
    
    13Asphalt (thousands of tons)
    
    
    195
    
    
    
    184
    
    
    
    188Reformer plant products (thousands of tons)
    
    
    102
    
    
    
    118
    
    
    
    135Other heavy products (thousands of tons)
    
    
    1,018
    
    
    
    819
    
    
    
    686Paraffins (thousands of tons)
    
    
    334
    
    
    
    163
    
    
    
    163Sales (in millions of pesos):Argentina
    
    
    4,171
    
    
    
    3,361
    
    
    
    2,991Outside of Argentina
    
    
    1,655
    
    
    
    1,170
    
    
    
    865Total
    
    
    5,826
    
    
    
    4,531
    
    
    
    3,856
  43




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##### Table of Contents



Refinor
          44




---



##### Table of Contents



Year ended December 31,2007
    
    
    2006
    
    
    2005Production:Gasoline (thousands of m3)
    
    
    99
    
    
    
    93
    
    
    
    102Virgin naphtha (thousands of m3)
    
    
    376
    
    
    
    420
    
    
    
    441Diesel oil (thousands of m3)
    
    
    336
    
    
    
    331
    
    
    
    358Natural gasoline (thousands of m3)
    
    
    141
    
    
    
    130
    
    
    
    121Propane / butane (thousands of tons)
    
    
    358
    
    
    
    357
    
    
    
    357Other products (thousands of m3)
    
    
    102
    
    
    
    127
    
    
    
    138Sales:Gasoline (thousands of m3)
    
    
    102
    
    
    
    95
    
    
    
    106Virgin naphtha (thousands of m3)
    
    
    493
    
    
    
    573
    
    
    
    573Diesel oil (thousands of m3)
    
    
    350
    
    
    
    450
    
    
    
    505Propane/butane (thousands of tons)
    
    
    362
    
    
    
    354
    
    
    
    352Other products (thousands of m3)
    
    
    90
    
    
    
    101
    
    
    
    111Sales(in millions of pesos):Argentina
    
    
    774
    
    
    
    731
    
    
    
    696Outside of Argentina
    
    
    711
    
    
    
    785
    
    
    
    733Total
    
    
    1,485
    
    
    
    1,516
    
    
    
    1,429
 Competition
  
 PETROCHEMICALS
  
    
    Maximizing the use of our own petrochemical raw materials.
    
    Capitalizing on current conditions in the styrenics market by expanding our
regional leadership and supporting growth in demand in the local market.
    
    Consolidating the fertilizer business, which uses natural gas and, therefore,
adds value to the business.
    45




---



##### Table of Contents



Argentine operations
 Argentine styrenics division
   
    
    An Integrated Petrochemical Complex at Puerto General San Martín, Province of
Santa Fé, with an annual production capacity of 160 thousand tons of styrene, 57
thousand tons of synthetic rubber, 180 thousand tons of ethylbenzene and 31 thousand
tons of ethylene. In 2006 the plant capacity was expanded from 110 thousand to 160
thousand tons per year. This expansion allowed us to consolidate our leadership and
support the growth of markets in the region.
    
    A polystyrene plant located at Zárate, Province of Buenos Aires, with a
production capacity of 66 thousand tons of polystyrene per year and 14 thousand tons of
bioriented polystyrene (Bops) per year. This state-of-the-art Bops plant is the only
one of its type in South America.
    
    An ethylene plant located in San Lorenzo with a production capacity of 19
thousand tons per year. It is located along the Paraná river coast, near our San
Lorenzo refinery, which provides the oil feedstock necessary for operation, and near
the Puerto General San Martín petrochemical complex, which uses ethylene as raw
material for the production of ethylbenzene and ultimately styrene. This ethylene
plant, which was acquired in 2004, has allowed us to expand our business value chain
and our product offering, resulting in an increase in our share of the plastic raw
material market.
    
    
    Styrene  100%
    
    Polystyrene  81%
    
    Styrene butadiene rubber (SBR)  97%.
  Fertilizers division
    46




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##### Table of Contents



Year ended December 31,2007
    
    
    2006
    
    
    2005Production(thousands of tons):Styrene (1)
    
    
    116
    
    
    
    95
    
    
    
    107Synthetic rubber (2)
    
    
    54
    
    
    
    53
    
    
    
    55Urea
    
    
    47
    
    
    
    58
    
    
    
    80UAN and other liquid fertilizers
    
    
    295
    
    
    
    392
    
    
    
    334Polystyrene
    
    
    62
    
    
    
    57
    
    
    
    58Bops
    
    
    13
    
    
    
    13
    
    
    
    13Sales(thousands of tons):Styrene (1)
    
    
    82
    
    
    
    100
    
    
    
    89Synthetic rubber (2)
    
    
    55
    
    
    
    56
    
    
    
    53Fertilizers
    
    
    673
    
    
    
    747
    
    
    
    676Polystyrene and Bops
    
    
    73
    
    
    
    72
    
    
    
    65Propylene
    
    
    25
    
    
    
    23
    
    
    
    23Sales(in millions of pesos):Argentina
    
    
    1,376
    
    
    
    1,084
    
    
    
    963Outside of Argentina
    
    
    417
    
    
    
    500
    
    
    
    413Total
    
    
    1,793
    
    
    
    1,584
    
    
    
    1,376
 
 (1)
    
    Including ethylbenzene.(2)
    
    Including SBR, NBR and butadiene. Brazilian operations
      47




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##### Table of Contents



2007
    
    
    2006
    
    
    2005Production(in thousands of tons):Styrene
    
    
    222
    
    
    
    234
    
    
    
    205Polystyrene
    
    
    123
    
    
    
    113
    
    
    
    95Sales(in thousands of tons):Styrene
    
    
    138
    
    
    
    136
    
    
    
    118Polystyrene
    
    
    121
    
    
    
    114
    
    
    
    95Other
    
    
    71
    
    
    
    94
    
    
    
    53Sales(in millions of pesos):Brazil
    
    
    1,353
    
    
    
    1,007
    
    
    
    856Outside of Brazil
    
    
    104
    
    
    
    207
    
    
    
    116Total sales
    
    
    1,457
    
    
    
    1,214
    
    
    
    972
 Competition
   
 GAS AND ENERGY
    48




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##### Table of Contents




    
    Growing profitably in the gas business.
    
    Growing profitably in the LPG business.
    
    Growing profitably in the electricity market.
 Marketing
     Gas Transportation  TGS
 Our interest in TGS and Corporate Developments
     49




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##### Table of Contents



Ente Nacional Regulador del Gas Comisión Nacional de Defensa de la Competencia
 Business
   2007
    
    
    2006
    
    
    2005Regulated Segment:Average firm committed capacity (1)
    
    
    72.7
    
    
    
    71.6
    
    
    
    68.3Average daily deliveries (1)
    
    
    63.0
    
    
    
    61.2
    
    
    
    57.6Annual load factor (2)
    
    
    87
    %
    
    
    86
    %
    
    
    84
    %Unregulated Segment:Liquids total production (3)
    
    
    828.6
    
    
    
    1,036.4
    
    
    
    882.5Processing capacity at year end (1)
    
    
    46.0
    
    
    
    43.0
    
    
    
    43.0
 
 (1)
    
    In millions of cubic meters per day.(2)
    
    Corresponds to the quotient of the average daily deliveries and the average firm contracted
capacity.(3)
    
    In thousands of tons. Regulated Energy Segment
   50




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Gas Trust
    Renegotiation process
   51




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##### Table of Contents



Non-regulated Businesses
    Competition
  7
  52




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##### Table of Contents



Electricity
    The Argentine Electricity Market
 ,
  Electricity Generation: Genelba and HPPL
    53




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##### Table of Contents



Year ended December 31,2007
    
    
    2006
    
    
    2005Power Generated (Gwh)
    
    
    5,146
    
    
    
    6,434
    
    
    
    6,114Power Sold (Gwh):Forward market
    
    
    2,421
    
    
    
    2,300
    
    
    
    1,255Spot market
    
    
    3,300
    
    
    
    4,656
    
    
    
    5,486Total sales
    
    
    5,721
    
    
    
    6,956
    
    
    
    6,741Sales(in millions of pesos)
    
    
    518
    
    
    
    500
    
    
    
    355
  54




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##### Table of Contents



Electricity Transmission: Enecor
  Electricity Distribution: Edesur
        55




---



##### Table of Contents



Annual sales in Gwh2007
    
    
    2006
    
    
    2005Sales in Gwh:Residential
    
    
    6,063
    
    
    
    5,638
    
    
    
    5,046General
    
    
    3,109
    
    
    
    2,967
    
    
    
    2,948Large users
    
    
    6,375
    
    
    
    6,232
    
    
    
    6,024Total
    
    
    15,547
    
    
    
    14,837
    
    
    
    14,018Sales (in millions of pesos)
    
    
    1,842
    
    
    
    1,412
    
    
    
    1,339
   Competition
   56




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##### Table of Contents



INSURANCE
            
    
    US$10,000,000 for combined claims for property damage and business interruption
for all our businesses, except for the oil and gas exploration and production
businesses;
 
    
    US$10,000,000 for claims for each property of our oil and gas exploration and production business;
    
    US$5,000,000 for control of wells; and
    
    US$5,000,000 in ocean and non-ocean marine third-party liability.
  
 PATENTS AND TRADEMARKS
   57




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##### Table of Contents



QUALITY, SAFETY, ENVIRONMENT AND HEALTH
    Excellence in Management
   New policy and guidelines, new management tools  Process Safety Program
   Safety
     58




---



##### Table of Contents



Environment
       Environmental Training
  Emergency Response
   59




---



##### Table of Contents



Health
      60




---



##### Table of Contents



REGULATION OF OUR BUSINESS
 Argentine Regulatory Framework
 Petroleum
   Exploration and Production
  2 2
    61




---



##### Table of Contents




    
    The quantity and the quality of extracted hydrocarbons, including (1) the
computable production levels of liquid hydrocarbons and (2) a break down of the crude
oil (specifying the type), condensate and total natural gas recovered (with a 0.1%
maximum error tolerance);
 
    
    Sales to domestic and foreign markets;
    
    Reference values for transfers made at no cost for purposes of further industrialization;
 
    
    Freight costs from location where marketable condition is acquired to location
where commercial transfer takes place; and
 
    
    Description of sales executed during the month.
       62




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##### Table of Contents



Net Worth Requirements
   Federalization Law
         63




---



##### Table of Contents



Transportation
     
    
    Maximum amounts for tariffs on hydrocarbon transportation through oil pipelines
and multiple purpose pipelines, as well as for tariffs on storage, use of buoys and the
handling of liquid hydrocarbons; and
 
    
    Maximum amounts that may be deducted in connection with crude oil
transportation by producers that, as of the date of the regulation, transport their
production through their own unregulated pipelines, for the purpose of assessing
royalties.
  Refining and Marketing
    64




---



##### Table of Contents



65




---



##### Table of Contents



Market Regulation
    Taxation
     3 3 3 3
  66




---



##### Table of Contents



Agreements for the supply of diesel oil to public transportation companies
     Stability of Fuel Prices
   Royalties  Exchange Rates
    67




---



##### Table of Contents



Natural Gas
   Regulatory framework
    ENARGAS
      68




---



##### Table of Contents



Rate Regulation
 Summary
  Regulation of Natural Gas Distributors Prior to the Public Emergency Law
  UNIREN
  
    
    Impact of tariffs on economic competitiveness and on income distribution;
 
    
    Quality of services to be provided and/or the capital expenditure programs
provided for in the contracts;
 
    
    Interest of customers and accessibility to the services;
    
    The safety of the systems; and
    
    The companys profitability.
   69




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##### Table of Contents



Modifications to the regulatory framework
  
    
    The creation of a trust fund (to be funded by tariffs payable by users of the
service, special credit programs and contributions from direct beneficiaries) to
finance the expansion of the industry and the creation of an electronic market;
 
    
    The creation of an electronic wholesale market to coordinate spot
transactions of the sale of natural gas and secondary market transactions for
transportation and distribution of natural gas; and
 
    
    A prohibition on distributors or their shareholders from having a controlling
participation in more than one gas dealer.
 Adjustment of Natural Gas Price at Wellhead
       70




---



##### Table of Contents



3
  Restrictions on Exports of Gas
      Compressed Natural Gas for Vehicles
   71




---



##### Table of Contents



Liquefied Petroleum Gas
  Regulatory framework
  
    
    Prices: the Secretary of Energy determines and disseminates reference prices
(which must be below export parity prices) for the domestic market (by region, on a
seasonal basis every six months), with the goal of guaranteeing regular supply in that
market, and may establish price stabilization mechanisms in order to avoid price
fluctuations in the domestic market.
 
    
    Market limitations: the Secretary of Energy and the Antitrust Commission, or
CNDC, are authorized to analyze the sector, for the purpose of fixing limits at each
stage of vertical integration of the industry.
 
    
    Open Access: an open access regime is established in connection with the
storage of LPG and the Secretary of Energy establishes terms and conditions for the
determination of maximum tariffs for storage.
 
    
    Imports/Exports: no restrictions are imposed, and no prior authorization is
required, for the import of LPG, and the Secretary of Energy may authorize the export
of LPG without restriction, so long as the domestic market is satisfied. No shortage of
supply is currently experienced in the domestic market.
 
    
    Trust Fund: a trust fund was established for the purpose of subsidizing the
consumption of LPG by the low-income residential sector and expanding the distribution
network to areas without service. The trust is to be funded from the sanctions
collected under this law and contributions from the national budget.
    72




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##### Table of Contents



Electricity
     Fondo de Inversiones Necesarias que permitan incrementar la oferta de
energía eléctrica en el Mercado Eléctrico Mayorista, or FONINVEMEM
  cargos
específicos
   73




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##### Table of Contents



Regulatory authorities
  (1)
    
    the Secretary of Energy of the Ministry of Federal Planning, Public Investment and
Services, and
 (2)
    
    the National Electricity Regulator (Ente Nacional Regulador de la Electricidad) (ENRE).
   
    
    enforcement of compliance with the Regulatory Framework Law and related
regulations;
 
    
    control of the delivery of electric services and enforcement of compliance with
the terms of concessions;
 
    
    adoption of rules applicable to generators, transmitters, distributors,
electricity users and other related parties concerning safety, technical procedures,
measurement and billing of electricity consumption, interruption and reconnection of
supplies, third-party access to real estate used in the electricity industry and
quality of services offered;
 
    
    prevention of anticompetitive, monopolistic and discriminatory conduct between
participants in the electricity industry;
    
    imposition of penalties for violations of concessions or other related regulations; and
    
    arbitration of conflicts between electricity sector participants.
 Consejo Federal de la Energía Eléctrica Fondo Subsidiario para Compensaciones
Regionales de Tarifas a Usuarios Finales
  74




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##### Table of Contents



The Wholesale Electricity Market
 Overview
   
    
    a term market in which generators, distributors and large users enter into
long-term agreements on quantities, prices and conditions;
 
    
    a spot market, in which prices are established on an hourly basis as a function
of economic production costs, represented by the short-term marginal cost of production
measured at the Ezeiza 500 kV substation, the systems load center; and
 
    
    a stabilization system for spot market prices applicable to purchases by
distributors, which operates on a quarterly basis.
 Operation of the wholesale electricity market
 Compañía Administradora del Mercado
Mayorista Eléctrico S.A.
  
    
    managing the national interconnection system pursuant to the Regulatory
Framework Law and related regulations, which includes:
 
    
    determining technical and economic dispatch of electricity in the national
interconnection system;
    
    maximizing the systems security and the quality of electricity supplied;
    
    minimizing wholesale prices in the spot market;
    
    planning energy capacity needs and optimizing energy use pursuant to the rules
set out from time to time by the Secretary of Energy; and
    
    monitoring the operation of the term market and administering the technical
dispatch of electricity pursuant to any agreements entered into in such market;
 
    
    acting as agent of the various wholesale electricity market participants;
    
    purchasing or selling electricity from or to other countries by performing the
relevant import/export operations; and
    
    providing consulting and other services related to these activities.
   75




---



##### Table of Contents



Wholesale electricity market participants
  Generators
 Asociación de Generadores de Energía Eléctrica de la
República Argentina
 Transmitters
   Asociación de
Transportistas de Energía Eléctrica de la República Argentina
 Distributors
   Asociación de Distribuidoras de
Energía Eléctrica de la República Argentina
 Large users
   Asociación de Grandes Usuarios de
Energía Eléctrica de la República Argentina
  76




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##### Table of Contents



Traders
  Spot market
 Spot prices
     Seasonal Prices
   
    
    prices charged by CAMMESA to distributors and large users changed only twice per
year (in summer and winter), with interim quarterly revisions in case of
significant changes in the spot price of energy, despite prices charged by
generators in the wholesale electricity market fluctuating constantly;
 
    
    prices were determined by CAMMESA based on the average cost of providing one MW
of additional energy (its marginal cost), as well as the costs associated with the
failure of the system and several other factors; and
 
    
    CAMMESA would use seasonal database and optimization models in determining the
seasonal prices and would consider both anticipated energy supplies and demand as
follows:
 
    
    in determining supply, CAMMESA would consider energy supplies provided by
generators based on their expected availability, committed imports of electricity
and the availability declared by generators;
 
    
    in determining demand, CAMMESA included the requirements of distributors and
large users purchasing in the wholesale electricity market as well as committed
exports.
  77




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##### Table of Contents



Stabilization Fund
    Term market
  Renegotiation of Utility Tariffs
  Concealment and Money Laundering
    78




---



##### Table of Contents



Venezuelan Regulatory Framework
 Petroleum and Gas
      The Performance of Hydrocarbon Related Activities
   79




---



##### Table of Contents



empresa mixta
  Licenses and permits
  Relevant Tax Features
 Income tax
    Value Added Tax
   80




---



##### Table of Contents



Municipal taxes
   Royalties
  Special Advantages and Contributions
  Law of Special Contribution to Extraordinary Prices
  OPEC
   Exchange control system
   81




---



##### Table of Contents



Additional Matters
  Ecuadorian Regulatory Framework
 Petroleum and Gas
    Exploration and Exploitation of Hydrocarbons
      82




---



##### Table of Contents



Bolivian Oil and Gas Industry and its Regulatory Framework
   Peruvian Regulatory Framework
  Brazilian Regulatory Framework
   83




---



##### Table of Contents



ORGANIZATION STRUCTURE
  
  84




---



##### Table of Contents



85




---



##### Table of Contents



PROPERTY, PLANT AND EQUIPMENT
  
 Item 4A. UNRESOLVED STAFF COMMENTS
   86




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##### Table of Contents



Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
  Analysis of Consolidated Results of Operations
 PROPORTIONAL CONSOLIDATION AND PRESENTATION OF DISCUSSION
   
    
    Compañía de Inversiones de Energía S.A. (CIESA), a company mainly engaged in
the gas transportation business in southern of Argentina through its subsidiary,
TGS.
 
    
    Distrilec Inversora S.A. (Distrilec), a company engaged in the electricity
distribution business in the southern area of the Federal Capital and twelve
districts of the Province of Buenos Aires, through its subsidiary, Edesur S.A.
(Edesur).
 
    
    Petrobras de Valores Internacional de España S.L. (PVIE), a holding company
whose main asset is 99.79% of the capital stock of Petrobras Energía Perú S.A.
     87




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##### Table of Contents



OVERVIEW
  
    
    Exploration and production of oil and gas;
    
    Refining and distribution;
    
    Petrochemicals; and
    
    Gas and energy.
    
    
    The volume of crude oil, oil products and natural gas we produce and sell;
    
    Changes in international prices of crude oil and oil by-products, which are
denominated in U.S. dollars;
    
    Fluctuations in the Argentine peso/U.S. dollar exchange rate;
    
    Interest rates;
    
    Changes to our capital expenditures plan;
    
    Price and export controls on crude oil and oil by-products; and
    
    Changes in laws or regulations affecting our operations, including tax and
environmental matters.
  88




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##### Table of Contents



FACTORS AFFECTING OUR CONSOLIDATED RESULTS OF OPERATIONS
 1) Regulation of the Energy Industry in Argentina
 a) Price Controls and Restrictions on Exports
  i) Natural Gas
 Mercado Electrónico del Gas
     89




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##### Table of Contents



ii) Withholding Taxes on Exports
      iii) Downstream margins
     90




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##### Table of Contents



iv) Electricity Generation
  Fondo de Estabilización Compañía Administradora del Mercado
Eléctrico S.A.
      91




---



##### Table of Contents



b) Regulation of Utilities
         92




---



##### Table of Contents



2) Argentine Economic Situation
  a) Recoverability of Assets
  Minimum presumed income tax credit
 Gas areas in Argentina
 b) Value of the Peso Against Foreign Currencies
    93




---



##### Table of Contents



c) Inflation
     3) Migration of Operating Agreements in Venezuela
      94




---



##### Table of Contents



4) Commodity Prices
    5) Oil and gas production in Argentina
     95




---



##### Table of Contents



6) Operations in Ecuador
  Teikoku Co. Ltd. Agreement, below.
 a) Recoverability of Investments and Amendments to the Hydrocarbons Law
      96




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##### Table of Contents



b) Tax Credits Derived from Operations
     97




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##### Table of Contents



c) Teikoku Co. Ltd. Agreement
     7) Sale of Petrobras Energías Interest in Petrobras de Valores Internacional de España S.L. (PVIE)
       98




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8) Operations in Bolivia
    9) Divestments
  a)
    
    In January 2007, Petrobras Energía executed an agreement for the sale of its 9.19%
shareholding in Hidroneuquén S.A., a company holding 59% of Hidroeléctrica Piedra del
Aguila S.A.s capital stock. The sale price amounted to US$15 million, accounting for a
P$23 million gain in 2007.
 b)
    
    In June 2007, Petrobras Energía signed an agreement for the sale to YPFB of its equity
interest in Petrobras Bolivia Refinación S.A. The sale price amounted to US$55 million,
accounting for a gain of P$44 million in 2007.
 c)
    
    In December 2007, Petrobras Energía signed an agreement for the sale of its 40% equity
interest in Petroquímica Cuyo S.A.I.C. The sale price amounted to US$32 million, accounting
for a gain of P$40 million in 2007.
 d)
    
    In July 2007, Petrobras Energía signed a stock purchase agreement with
Electroingeniería S.A for the sale of its 22.22% equity interest in Yacylec. The aforesaid
transaction was authorized by the ENRE in December 2007. The sale price amounted to US$6
million, accounting for a gain of P$16 million in 2007.
 e)
    
    In December 2007, after various regulatory agencies and authorities granted the final
approvals upon which the completion of the transaction was contingent, we sold our 50%
equity interest in Citelec. We did not recognize any significant gains or losses in 2007 on
account of this transaction.
 10) Changes in E&P asset portfolio
 a)
    
    In February 2007, we purchased a 25.67% and 52.37% interest in the Nequén basin fields
of Sierra Chata and Parva Negra, respectively, from ConocoPhillips for US$77.6 million. The
transaction is subject to the approval of the applicable regulatory authorities. Upon
compliance with all regulatory requirements and consummation of the transaction, our
interest in Sierra Chata will increase to 45.5523% and in Parva Negra to 100%.Sierra Chata is a natural gas producing field, with total proved reserves of 51 million
barrels of oil equivalent as of December 31, 2007. Daily sales volumes of natural gas in
2007 averaged 2.2 million cubic meters. Parva Negra is a lot adjacent to Sierra Chata block,
having two drilled wells with natural gas projects.b)
    
    In December 2007, we acquired a 13.72% interest in El Tordillo and La Tapera  Puesto
Quiroga assets for US$117.5 million. This transaction became effective in March 2008 after
completion of all contractual formalities. El Tordillo concession produces Escalante crude
(crude oil of 24° API gravity), while La Tapera  Puesto Quiroga concession is in the
exploration stage. As a consequence of the acquisition of the aforementioned El Tordillo
interest, our production increased approximately 3,500 barrels per day.
  99




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c)
    
    In November 2007, we sold 76.15% of our rights and obligations in Bajada del Palo area,
transferring a 73.15% interest to Petrolera Entre Lomas S.A. and the remaining 3% to APCO.
  d)
    
    In October 2006, we sold our rights and obligations in Refugio Tupungato y Atamisqui
areas. As a result of this transaction we recognized a gain of P$85 million.
 11) Tax benefits regarding Innova operations  FUNDOPEM
   12) Derivative financial instruments
   100




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DISCUSSION OF RESULTS
  Without proportional consolidationof CIESA and DistrilecWith proportional consolidation
    
    
    For the year ended December 31,For the year ended December 31,
    
    
    (Unaudited)2007
    
    
    2006
    
    
    2005
    
    
    2007
    
    
    2006
    
    
    2005(in millions of pesos)Net sales
    
    
    13,458
    
    
    
    11,745
    
    
    
    10,655
    
    
    
    11,997
    
    
    
    10,458
    
    
    
    9,512Cost of sales
    
    
    (10,132
    )
    
    
    (8,068
    )
    
    
    (6,851
    )
    
    
    (9,173
    )
    
    
    (7,206
    )
    
    
    (6,059
    )Gross Profit
    
    
    3,326
    
    
    
    3,677
    
    
    
    3,804
    
    
    
    2,824
    
    
    
    3,252
    
    
    
    3,453Administrative and selling
expenses
    
    
    (1,444
    )
    
    
    (1,277
    )
    
    
    (1,136
    )
    
    
    (1,290
    )
    
    
    (1,148
    )
    
    
    (1,034
    )Exploration expenses
    
    
    (172
    )
    
    
    (117
    )
    
    
    (34
    )
    
    
    (172
    )
    
    
    (117
    )
    
    
    (34
    )Other
operating expenses, net
    
    
    (177
    )
    
    
    (135
    )
    
    
    (329
    )
    
    
    (256
    )
    
    
    (96
    )
    
    
    (321
    )Operating income
    
    
    1,533
    
    
    
    2,148
    
    
    
    2,305
    
    
    
    1,106
    
    
    
    1,891
    
    
    
    2,064Equity in earnings of
affiliates
    
    
    176
    
    
    
    219
    
    
    
    281
    
    
    
    234
    
    
    
    253
    
    
    
    315Financial income
(expense) and holding
gains (losses)
    
    
    (495
    )
    
    
    (506
    )
    
    
    (899
    )
    
    
    (326
    )
    
    
    (363
    )
    
    
    (752
    )Other income (loss), net
    
    
    130
    
    
    
    93
    
    
    
    (459
    )
    
    
    139
    
    
    
    102
    
    
    
    (448
    )Subtotal
    
    
    1,344
    
    
    
    1,954
    
    
    
    1,228
    
    
    
    1,153
    
    
    
    1,883
    
    
    
    1,179Income tax provision
    
    
    (494
    )
    
    
    (465
    )
    
    
    (211
    )
    
    
    (393
    )
    
    
    (477
    )
    
    
    (218
    )Minority interest
insubsidiaries
    
    
    (277
    )
    
    
    (425
    )
    
    
    (288
    )
    
    
    (187
    )
    
    
    (342
    )
    
    
    (232
    )Net income
    
    
    573
    
    
    
    1,064
    
    
    
    729
    
    
    
    573
    
    
    
    1,064
    
    
    
    729
  101




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With Proportional Consolidation
 For the year ended December 31,2007
    
    
    2006
    
    
    2005(in millions of pesos)Net sales(1)Oil and Gas Exploration and Production
    
    
    4,624
    
    
    
    4,781
    
    
    
    4,657Refining and Distribution
    
    
    5,826
    
    
    
    4,531
    
    
    
    3,856Petrochemicals
    
    
    3,063
    
    
    
    2,490
    
    
    
    2,178Gas and Energy (2)
    
    
    2,826
    
    
    
    2,593
    
    
    
    2,136Corporate and Eliminations (3)
    
    
    (2,881
    )
    
    
    (2,650
    )
    
    
    (2,172
    )Total
    
    
    13,458
    
    
    
    11,745
    
    
    
    10,655Gross Profit(4)Oil and Gas Exploration and Production
    
    
    2,142
    
    
    
    2,687
    
    
    
    2,691Refining and Distribution
    
    
    82
    
    
    
    (161
    )
    
    
    130Petrochemicals
    
    
    387
    
    
    
    422
    
    
    
    476Gas and Energy (2)
    
    
    725
    
    
    
    700
    
    
    
    547Corporate and Eliminations (3)
    
    
    (10
    )
    
    
    29
    
    
    
    (40
    )Total
    
    
    3,326
    
    
    
    3,677
    
    
    
    3,804Operating IncomeOil and Gas Exploration and Production
    
    
    1,480
    
    
    
    2,179
    
    
    
    2,039Refining and Distribution
    
    
    (314
    )
    
    
    (468
    )
    
    
    (149
    )Petrochemicals
    
    
    92
    
    
    
    162
    
    
    
    267Gas and Energy (2)
    
    
    653
    
    
    
    537
    
    
    
    450Corporate and Eliminations (3)
    
    
    (378
    )
    
    
    (262
    )
    
    
    (302
    )Total
    
    
    1,533
    
    
    
    2,148
    
    
    
    2,305
 
 (1)
    
    Royalties with respect to the oil and gas business in Argentina, Peru and Bolivia (in the
case of the latter, only for sales until May 2007) are accounted for as a cost or production
and are not deducted in determining net sales.(2)
    
    This segment includes two sections: Electricity and Gas Transportation.(3)
    
    Eliminations correspond to sales between our business units and their associated costs.(4)
    
    Net sales less cost of sales.  102




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Without Proportional Consolidation (Unaudited)
 For the year ended December 31,2007
    
    
    2006
    
    
    2005(in millions of pesos)Net Sales(1)Oil and Gas Exploration and Production
    
    
    4,624
    
    
    
    4,781
    
    
    
    4,657Refining and Distribution
    
    
    5,826
    
    
    
    4,531
    
    
    
    3,856Petrochemicals
    
    
    3,063
    
    
    
    2,490
    
    
    
    2,178Gas and Energy (2)
    
    
    1,365
    
    
    
    1,306
    
    
    
    972Corporate and Eliminations (3)
    
    
    (2,881
    )
    
    
    (2,650
    )
    
    
    (2,151
    )Total
    
    
    11,997
    
    
    
    10,458
    
    
    
    9,512Gross Profit(4)Oil and Gas Exploration and Production
    
    
    2,142
    
    
    
    2,687
    
    
    
    2,691Refining and Distribution
    
    
    82
    
    
    
    (161
    )
    
    
    130Petrochemicals
    
    
    387
    
    
    
    422
    
    
    
    476Gas and Energy (2)
    
    
    223
    
    
    
    275
    
    
    
    196Corporate and Eliminations (3)
    
    
    (10
    )
    
    
    29
    
    
    
    (40
    )Total
    
    
    2,824
    
    
    
    3,252
    
    
    
    3,453Operating IncomeOil and Gas Exploration and Production
    
    
    1,480
    
    
    
    2,179
    
    
    
    2,039Refining and Distribution
    
    
    (314
    )
    
    
    (468
    )
    
    
    (149
    )Petrochemicals
    
    
    92
    
    
    
    162
    
    
    
    267Gas and Energy (2)
    
    
    226
    
    
    
    280
    
    
    
    209Corporate and Eliminations (3)
    
    
    (378
    )
    
    
    (262
    )
    
    
    (302
    )Total
    
    
    1,106
    
    
    
    1,891
    
    
    
    2,064
 
 (1)
    
    Royalties with respect to the oil and gas business in Argentina, Peru and Bolivia (in the
case of the latter, only for sales until May 2007) are accounted for as a cost or production
and are not deducted in determining net sales.(2)
    
    This segment includes two sections: Electricity and Gas Transportation.(3)
    
    Eliminations correspond to sales between our business units and their associated costs.(4)
    
    Net sales less cost of sales. YEAR ENDED DECEMBER 31, 2007 COMPARED TO YEAR ENDED DECEMBER 31, 2006
 Net income
 Net sales
   103




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Gross profit:
  Administrative and selling expenses
  Exploration expenses
 Other operating expense, net
  Operating income:
  Equity in earnings of affiliates
  104




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Financial income (expense) and holding gains (losses)
   Other income, net
   
    
    P$1,014 million gain from the sale of 40% of our interest in PVIE.
    
    P$62 million gain from the sale of oil areas in Argentina.
    
    P$44 million gain from the sale of Petrobras Bolivia Refinación S.A.
    
    P$40 million gain from the sale of Petroquímica Cuyo S.A.
    
    P$23 million gain from the sale of Hidroneuquén S.A.
    
    P$16 million gain from the sale of Yacylec S.A.
    
    P$759 million impairment charge on assets in Ecuador, following the enactment of
the new Hydrocarbons Law.
    
    P$214 million impairment charge on assets in Venezuela, principally related to
the full writedown of the credit granted to us in connection with the renegotiation
of our operating agreements in 2006.
    
    P$41 million impairment charge on loans granted to joint venture partners in Venezuela.
  105




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
    
    P$85 million gain from the sale of oil areas in Argentina.
    
    P$23 million gain from reversal of an allowance on the investment in Citelec S.A.
    
    P$10 million gain from reversal of an allowance on the investment in Hidroneuquén S.A.
    
    P$18 million assessment by SENIAT  Venezuela.
    
    P$6 million net impairment charge on assets in Venezuela.
 Income Tax
  
 ANALYSIS OF OPERATING RESULTS BY BUSINESS SEGMENT
 Oil and Gas Exploration and Production
 Operating income
 Net sales
   Argentina
   106




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Outside of Argentina
  Ecuador
    Peru
    107




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##### Table of Contents



Bolivia
  Mexico
  Gross profit:
   Administrative and selling expenses:
 Exploration expenses
 Other operating expense, net
 Refining and Distribution
 Operating expense, net:
  108




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##### Table of Contents



Net sales
       Gross profit
 Administrative and selling expenses
 Other operating income (expense), net
 Petrochemicals
 Operating income:
  109




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Net sales
               110




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##### Table of Contents



Gross profit:
        Administrative and selling expenses
 Other operating income, net
 Gas and Energy
 Marketing and Transportation of Gas
 Operating income
 Net sales
   111




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Gross profit
 Other operating income, net
 Electricity
 Operating income
 Net sales
   Gross profit
 Administrative and selling expenses
  112




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ANALYSIS OF EQUITY IN EARNINGS OF AFFILIATES
  Compañía de Inversiones de Energía S.A (CIESA)/ Transportadora de Gas del Sur S.A (TGS) :
    Distrilec Inversora S.A. (Distrilec) / Edesur S.A (Edesur):
    Petrolera Entre Lomas S.A. (PELSA):
  Refinería del Norte S.A. (Refinor):
   113




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Mixed Companies in Venezuela:
  Oleoductos del Valle S.A. (Oldelval):
  YEAR ENDED DECEMBER 31, 2006 COMPARED TO YEAR ENDED DECEMBER 31, 2005
 Net income
 Net sales
  Gross profit
  Administrative and selling expenses
  114




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##### Table of Contents



Exploration expenses
 Other operating expense, net
  Operating income
  Equity in earnings of affiliates
 Financial (expense) income and holding (losses) gains
  Other income (expenses), net
  115




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##### Table of Contents




    
    P$85 million gain from the sale of oil areas in Argentina.
    
    P$23 million gain from the reversal of an allowance on the investment in Citelec S.A.
    
    P$10 million gain from the reversal of an allowance on the investment in Hidroneuquén S.A.
    
    P$18 million assessment by SENIAT  Venezuela.
    
    P$6 million impairment charge on assets in Venezuela.
  
    
    P$310 million impairment charge on assets in Venezuela.
    
    P$88 million impairment charge on areas in Argentina.
    
    P$54 million assessment by SENIAT  Venezuela.
 Income Tax
    
 ANALYSIS OF OPERATING RESULTS BY BUSINESS SEGMENT
 Oil and Gas Exploration and Production
 Operating income
 Net sales
   116




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Argentina
    Outside of Argentina
  Ecuador
    Peru
   117




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##### Table of Contents



Bolivia
   Mexico
  Gross Profit
 Administrative and selling expenses
 Exploration expenses
 Other operating expense, net
 Refining and Distribution
 Operating expenses
  118




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##### Table of Contents



Net sales
       Gross profit
 Administrative and selling expenses
 Other operating income (expense), net
 Petrochemicals
 Operating income
 Net sales
  119




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##### Table of Contents



StyrenicsArgentina
         StyrenicsBrazilInnova
    120




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Fertilizers
 Gross profit
 StyrenicsArgentina
  StyrenicsBrazil
  Fertilizers
 Administrative and selling expenses
 Other operating income, net
 Gas and Energy
 Marketing and Transportation of Gas
 Operating income
 Net sales
   121




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##### Table of Contents



Gross profit
 Other operating income, net
 Electricity
 Operating income
 Electricity Generation
 Net sales
   Gross profit
 Administrative and selling expenses
  122




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ANALYSIS OF EQUITY IN EARNINGS OF AFFILIATES
  CIESA /TGS :
   Distrilec/Edesur :
   Refinor :
     Petroquímica Cuyo S.A. (Cuyo) :
   123




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Petrobras Bolivia Refinación (PBR) :
  Oldelval :
  PELSA :
   124




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##### Table of Contents



CRITICAL ACCOUNTING POLICIES
   Estimates of oil and gas reserves
      Impairment of long-lived assets
    125




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##### Table of Contents



Successful efforts method of accounting
       126




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Contingencies
   Income tax
     127




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
   
    
    Design a capital structure in line with industry standards adaptable to
the financial markets in which we operate, by establishing a debt maturity profile
consistent with estimated cash generation.
    
    Gradually reduce indebtedness cost.
    
    Have adequate flexibility to overcome the volatility inherent to emerging
capital markets, by adhering to a conservative cash management policy that
minimizes the risks of financial distress.
   
    
    Strict compliance with all financial obligations, with a 0.6% decline in
our annual average indebtedness, measured in US dollars.
    
    Continued implementation of the Capital Expenditures Plan.
    
    Reduction in indebtedness costs.
   Analysis of Liquidity and Capital Resources
   128




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##### Table of Contents



Without ProportionalWith Proportional
    
    
    Consolidation of CIESAConsolidation
    
    
    and Distrilec (Unaudited)2007
    
    
    2006
    
    
    2005
    
    
    2007
    
    
    2006
    
    
    2005Cash and cash equivalent at the beginning of
the year
    
    
    1,350
    
    
    
    790
    
    
    
    1,067
    
    
    
    1,044
    
    
    
    474
    
    
    
    846Net cash provided by operations
    
    
    1,853
    
    
    
    2,877
    
    
    
    1,998
    
    
    
    1,325
    
    
    
    2,506
    
    
    
    1,626Net cash used in investing activities
    
    
    (1,697
    )
    
    
    (2,022
    )
    
    
    (1,682
    )
    
    
    (1,450
    )
    
    
    (1,888
    )
    
    
    (1,544
    )Net cash used in financing activities
    
    
    (364
    )
    
    
    (295
    )
    
    
    (602
    )
    
    
    (44
    )
    
    
    (48
    )
    
    
    (463
    )Effect of exchange rate change on cash
    
    
    25
    
    
    
    
    
    
    
    9
    
    
    
    23
    
    
    
    
    
    
    
    9Cash and cash equivalent at the end of the year
    
    
    1,167
    
    
    
    1,350
    
    
    
    790
    
    
    
    898
    
    
    
    1,044
    
    
    
    474
 Cash
   Operating activities
    Investing activities
   2007
    
    
    2006
    
    
    2005 Oil and Gas Exploration and Production
    
    
    1,359
    
    
    
    1,544
    
    
    
    1,235 Petrochemical
    
    
    305
    
    
    
    195
    
    
    
    119 Refining and Distribution
    
    
    141
    
    
    
    249
    
    
    
    199 Gas and Energy
    
    
    61
    
    
    
    4
    
    
    
    2 Corporate
    
    
    26
    
    
    
    76
    
    
    
    64Total capital expenditures
    
    
    1,892
    
    
    
    2,068
    
    
    
    1,619 Divestments
    
    
    (406
    )
    
    
    (124
    )
    
    
    Total net capital expenditures
    
    
    1,486
    
    
    
    1,944
    
    
    
    1,619
  129




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Oil and Gas Exploration and Production
     Refining and Distribution
      Petrochemicals
     130




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##### Table of Contents



Gas and Energy
    Financing activities
   
    
    In 2007, we paid at maturity Series G Notes and the Sixth Series under
the US$2.5 billon Notes Program in an aggregate amount of P$891 million (US$283
million). In addition, Petrobras Energía and Petrobras Energía Perú S.A repaid bank
loans and long-term lines of credit in an amount of P$29 million and P$104 million,
respectively.
    
    In 2006, we paid at maturity Series B Notes under the US$2.5 billon Notes
Program in an aggregate amount of P$15 million (US$5 million). In addition, we and
Petrobras Energía Perú S.A. repaid bank loans and long-term lines of credit in an
amount of P$129 million and P$128 million, respectively.
    
    In 2005, Series C, M and K Notes under the US$2.5 billon Notes Program
were fully prepaid, in the aggregate amount of P$1,251 million (US$428 million). In
addition, we paid at maturity Class F Notes under the Notes Program for an
aggregate amount of P$184 (US$64 million). Petrobras Energía Venezuela S.A. and
Innova S.A. paid debt owed to the International Finance Corporation (IFC) in the
amount of P$415 million (US$137 million). In addition, we repaid bank loans in the
amount of P$117 million.
  
    
    In 2007, we received P$927 million from the issuance of US$300 million
Series S Notes under the US$2.5 billon Notes Program. The Series S Notes mature in
May 2017 and pay interest at a fixed rate of 5.875%. Payments under the Series S
Notes are supported by a standby purchase agreement provided by our controlling
shareholder, Petrobras. Under the terms of the Series S Notes, in the event of a
change of control, Petrobras Energia will be required to offer to repurchase the
Series S Notes at a repurchase price equal to 101% of the outstanding principal
amount plus accrued interest to the date of repurchase. In addition, Innova S.A.
and Petrobras Energía Perú S.A. received cash provided by other bank financing in
the amount of P$30 million and P$342 million, respectively.
    
    In 2006,we received P$82 (US$26 million) for foreign trade financing. In
addition, Petrobras Energía Perú S.A. received cash provided by other bank
financing in the amount of P$138 million (US$45 million).
    
    In 2005, Petrobras Internacional Braspetro BV granted us a P$582 million
(US$200 million) loan. The funds were used to prepay Class M and K notes under the
US$2.5 billion Program. In addition, cash provided by other bank financing totaled
P$165 million (US$56 million).
  131




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.
  
 DESCRIPTION OF INDEBTEDNESS
      6 or more1 year
    
    
    2 years
    
    
    3 years
    
    
    4 years
    
    
    5 years
    
    
    yearsMillions of pesos
    
    
    1,443
    
    
    
    654
    
    
    
    1,220
    
    
    
    334
    
    
    
    65
    
    
    
    2,209
    132




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##### Table of Contents



Cross Default Provisions
    
 FUTURE CAPITAL REQUIREMENTS
    Oil and Gas Exploration and Production
  Argentina
   133




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##### Table of Contents



Peru
  Ecuador
  Bolivia
  Refining and Distribution
    Petrochemicals
    Gas and Energy
   134




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##### Table of Contents



OFF-BALANCE SHEET TRANSACTIONS
  OCP Investments Letters of Credit
  
 CONTRACTUAL OBLIGATIONS
  Payments due by periodLess and 1
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    year
    
    
    1-3 years
    
    
    3-5 years
    
    
    5 years(in millions of pesos)Debt Obligations
    
    
    5,925
    
    
    
    1,443
    
    
    
    1,874
    
    
    
    399
    
    
    
    2,209Purchase ObligationsShip or pay agreement with OCP(1) (2) (6)
    
    
    2,137
    
    
    
    145
    
    
    
    325
    
    
    
    367
    
    
    
    1,300Long-term service agreement (6)
    
    
    1,304
    
    
    
    426
    
    
    
    486
    
    
    
    166
    
    
    
    226Petroleum services and materials (6)
    
    
    2,054
    
    
    
    567
    
    
    
    398
    
    
    
    402
    
    
    
    687Ethylene (4)(6)
    
    
    1,750
    
    
    
    217
    
    
    
    425
    
    
    
    332
    
    
    
    776Benzene (5)(6)
    
    
    4,283
    
    
    
    494
    
    
    
    1,049
    
    
    
    830
    
    
    
    1,910Oil purchase agreements for Refinery(6)
    
    
    212
    
    
    
    212
    
    
    
    
    
    
    
    
    
    
    
    Gas transportation capacity with TGS(3)
    
    
    884
    
    
    
    123
    
    
    
    246
    
    
    
    369
    
    
    
    146Gas purchase agreements for Genelba (6)
    
    
    41
    
    
    
    31
    
    
    
    10
    
    
    
    
    
    
    
    Pension Plan
    
    
    126
    
    
    
    13
    
    
    
    23
    
    
    
    25
    
    
    
    65Total
    
    
    18,716
    
    
    
    3,671
    
    
    
    4,836
    
    
    
    2,890
    
    
    
    7,319Sales ObligationsNatural gas
    
    
    1,880
    
    
    
    561
    
    
    
    374
    
    
    
    325
    
    
    
    620Styrene
    
    
    672
    
    
    
    149
    
    
    
    393
    
    
    
    130
    
    
    
    Electric power
    
    
    257
    
    
    
    150
    
    
    
    104
    
    
    
    3
    
    
    
    LPG
    
    
    175
    
    
    
    142
    
    
    
    22
    
    
    
    11
    
    
    
    Oil
    
    
    2,390
    
    
    
    1,654
    
    
    
    736
    
    
    
    
    
    
    
    Total
    
    
    5,374
    
    
    
    2,656
    
    
    
    1,629
    
    
    
    469
    
    
    
    620
 
 (1)
    
    Net of transportation capacity sold to third parties(2)
    
    Estimated price US$2.30 per barrel.(3)
    
    Estimated price P$7.9 million per millon of cubic meters.(4)
    
    Estimated price US$806 per ton. Contractual prices are in US Dollars. Peso amounts translated
using exchange rate as of December 31, 2007.(5)
    
    Estimated price US$709 per ton. Contractual prices are in US Dollars. Peso amounts translated
using exchange rate as of December 31, 2007.(6)
    
    Prices are generally determined by formulas based on future market prices. Estimated prices
used to calculate the monetary equivalent of these purchase obligations for purposes of the
table are based on current market prices as of December 31, 2007 and may not reflect actual
future prices of these commodities. Accordingly, the peso amounts provided in this table with
respect to these obligations are provided for illustrative purpose only.  135




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Obligations by periodLess than 1
    
    
    
    
    
    
    
    
    
    
    More than 5Total
    
    
    year
    
    
    1-3 years
    
    
    3-5 years
    
    
    YearsPurchase ObligationsShip or pay agreement with OCP (in
millions of barrels)
    
    
    295
    
    
    
    20
    
    
    
    47
    
    
    
    53
    
    
    
    175Ethylene (in thousands of tons)
    
    
    689
    
    
    
    55
    
    
    
    131
    
    
    
    144
    
    
    
    359Benzene (in thousands of tons)
    
    
    1,919
    
    
    
    154
    
    
    
    365
    
    
    
    400
    
    
    
    1,000Oil Purchase agreements for Refinery (in
millons of barrels)
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    Gas transportation capacity with TGS (in
millons of cubic meters)
    
    
    7,869
    
    
    
    1,095
    
    
    
    2,190
    
    
    
    3,285
    
    
    
    1,299Gas purchase agreements for Genelba (in
millions of cubic meters)
    
    
    262
    
    
    
    197
    
    
    
    65
    
    
    
    
    
    
    
    Sales ObligationsNatural gas (in millions of cubic meters)
    
    
    10,196
    
    
    
    2,699
    
    
    
    1,869
    
    
    
    1,774
    
    
    
    3,854Styrene (in thousands of tons)
    
    
    150
    
    
    
    35
    
    
    
    85
    
    
    
    30
    
    
    
    Electric power (in MWh)
    
    
    2,337
    
    
    
    1,390
    
    
    
    928
    
    
    
    19
    
    
    
    LPG (in thousands of tons)
    
    
    235
    
    
    
    130
    
    
    
    70
    
    
    
    35
    
    
    
    Oil (in millions of bbls)
    
    
    10
    
    
    
    7
    
    
    
    3
    
    
    
    
    
    
    
    
 Long Term Service Agreement
 Ship or Pay Agreement with OCP
 Petroleum services and materials.
 Benzene and ethylene supply agreements
 Gas Transportation Agreements
 Gas Purchase Agreement for Genelba
 Oil purchase agreements for Refinery
  136




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##### Table of Contents



Styrene
 Oil
 LPG and Electric Power Sales:
 Natural Gas Sales
 
 U.S. GAAP RECONCILIATION
    137




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##### Table of Contents



RECONCILIATION TABLES
  For the Year Ended December 31, 2007WithoutWith
    
    
    
    
    
    
    
    
    
    
    ProportionalProportional
    
    
    
    
    
    
    
    
    
    
    ConsolidationConsolidation
    
    
    CIESA(1)
    
    
    Distrilec(1)
    
    
    (Unaudited)(in millions of pesos)Net sales(2)
    
    
    13,458
    
    
    
    (567
    )
    
    
    (894
    )
    
    
    11,997Cost of sales
    
    
    (10,132
    )
    
    
    280
    
    
    
    679
    
    
    
    (9,173
    )Gross profit
    
    
    3,326
    
    
    
    (287
    )
    
    
    (215
    )
    
    
    2,824Administrative and selling expenses
    
    
    (1.444
    )
    
    
    38
    
    
    
    116
    
    
    
    (1,290
    )Exploration expenses
    
    
    (172
    )
    
    
    
    
    
    
    
    
    
    
    (172
    )Other operating expenses, net
    
    
    (177
    )
    
    
    (2
    )
    
    
    (77
    )
    
    
    (256
    )Operating income
    
    
    1,533
    
    
    
    (251
    )
    
    
    (176
    )
    
    
    1,106Equity in earnings of affiiates
    
    
    176
    
    
    
    7
    
    
    
    51
    
    
    
    234Financial income (expense) and
holding gains (losses)
    
    
    (495
    )
    
    
    139
    
    
    
    30
    
    
    
    (326
    )Other expenses, net
    
    
    130
    
    
    
    3
    
    
    
    6
    
    
    
    139Income (loss) before income tax
and minority interest in
subsidiaries
    
    
    1.344
    
    
    
    (102
    )
    
    
    (89
    )
    
    
    1,153Income tax provision
    
    
    (494
    )
    
    
    57
    
    
    
    44
    
    
    
    (393
    )Minority interest in subsidiaries
    
    
    (277
    )
    
    
    45
    
    
    
    45
    
    
    
    (187
    )Net income
    
    
    573
    
    
    
    
    
    
    
    
    
    
    
    573
 
 (1)
    
    Both the results of CIESA and Distrilec are proportionally consolidated in our Gas and Energy
segment.(2)
    
    Net of P$35 million in intercompany sales. For the Year Ended December 31, 2006WithoutWith
    
    
    
    
    
    
    
    
    
    
    ProportionalProportional
    
    
    
    
    
    
    
    
    
    
    ConsolidationConsolidation
    
    
    CIESA(1)
    
    
    Distrilec(1)
    
    
    (Unaudited)(in millions of pesos)Net sales(2)
    
    
    11,745
    
    
    
    (592
    )
    
    
    (695
    )
    
    
    10,458Cost of sales
    
    
    (8,068
    )
    
    
    268
    
    
    
    594
    
    
    
    (7,206
    )Gross profit
    
    
    3,677
    
    
    
    (324
    )
    
    
    (101
    )
    
    
    3,252Administrative and selling expenses
    
    
    (1,277
    )
    
    
    35
    
    
    
    94
    
    
    
    (1.148
    )Exploration expenses
    
    
    (117
    )
    
    
    
    
    
    
    
    
    
    
    (117
    )Other operating expenses net
    
    
    (135
    )
    
    
    1
    
    
    
    38
    
    
    
    (96
    )Operating income
    
    
    2,148
    
    
    
    (288
    )
    
    
    31
    
    
    
    1,891Equity in earnings of affiliates
    
    
    219
    
    
    
    71
    
    
    
    (37
    )
    
    
    253Financial income (expense) and
holding gains (losses)
    
    
    (506
    )
    
    
    132
    
    
    
    11
    
    
    
    (363
    )Other income, net
    
    
    93
    
    
    
    
    
    
    
    9
    
    
    
    102Income (loss) before income tax
and minority interest in
subsidiaries
    
    
    1,954
    
    
    
    (85
    )
    
    
    14
    
    
    
    1,883Income tax provision
    
    
    (465
    )
    
    
    (6
    )
    
    
    (6
    )
    
    
    (477
    )Minority interest in subsidiaries
    
    
    (425
    )
    
    
    91
    
    
    
    (8
    )
    
    
    (342
    )Net income
    
    
    1,064
    
    
    
    
    
    
    
    
    
    
    
    1,064
 
 (1)
    
    Both the results of CIESA and Distrilec are proportionally consolidated in our Gas and Energy
segment.(2)
    
    Net of P$40 million in intercompany sales.  138




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For the Year Ended December 31, 2005WithoutWith
    
    
    
    
    
    
    
    
    
    
    ProportionalProportional
    
    
    
    
    
    
    
    
    
    
    ConsolidationConsolidation
    
    
    CIESA(1)
    
    
    Distrilec(1)
    
    
    (Unaudited)(in millions of pesos)Net sales(2)
    
    
    10,655
    
    
    
    (492
    )
    
    
    (651
    )
    
    
    9,512Cost of sales
    
    
    (6,851
    )
    
    
    238
    
    
    
    554
    
    
    
    (6,059
    )Gross profit
    
    
    3,804
    
    
    
    (254
    )
    
    
    (97
    )
    
    
    3,453Administrative and selling expenses
    
    
    (1.136
    )
    
    
    29
    
    
    
    73
    
    
    
    (1.034
    )Exploration expenses
    
    
    (34
    )
    
    
    
    
    
    
    
    
    
    
    (34
    )Other operating expenses net
    
    
    (329
    )
    
    
    3
    
    
    
    5
    
    
    
    (321
    )Operating income
    
    
    2,305
    
    
    
    (222
    )
    
    
    (19
    )
    
    
    2,064Equity in earnings of affiliates
    
    
    281
    
    
    
    42
    
    
    
    (8
    )
    
    
    315Financial income (expense) and
holding gains (losses)
    
    
    (899
    )
    
    
    128
    
    
    
    19
    
    
    
    (752
    )Other expenses, net
    
    
    (459
    )
    
    
    
    
    
    
    11
    
    
    
    (448
    )Income (loss) before income tax
and minority interest in
subsidiaries
    
    
    1,228
    
    
    
    (52
    )
    
    
    3
    
    
    
    1,179Income tax provision
    
    
    (211
    )
    
    
    (6
    )
    
    
    (1
    )
    
    
    (218
    )Minority interest in subsidiaries
    
    
    (288
    )
    
    
    58
    
    
    
    (2
    )
    
    
    (232
    )Net income
    
    
    729
    
    
    
    
    
    
    
    
    
    
    
    729
 
 (1)
    
    Both the results of CIESA and Distrilec are proportionally consolidated in our Gas and Energy
segment.(2)
    
    Net of P$21 million in intercompany sales.  For the Year Ended December 31, 2007WithoutWith
    
    
    
    
    
    
    
    
    
    
    ProportionalProportional
    
    
    
    
    
    
    
    
    
    
    ConsolidationConsolidation
    
    
    CIESA
    
    
    Distrilec
    
    
    (Unaudited)(in millions of pesos)Cash and cash equivalent at the beginning of
the year
    
    
    1,350
    
    
    
    (239
    )
    
    
    (67
    )
    
    
    1,044Net cash provided by operations
    
    
    1,853
    
    
    
    (304
    )
    
    
    (224
    )
    
    
    1,325Net cash used in investing activities
    
    
    (1,697
    )
    
    
    117
    
    
    
    130
    
    
    
    (1,450
    )Net cash used in financing activities
    
    
    (364
    )
    
    
    231
    
    
    
    89
    
    
    
    (44
    )Effect of exchange rate change on cash
    
    
    25
    
    
    
    (1
    )
    
    
    (1
    )
    
    
    23Cash and cash equivalent at the end of the year
    
    
    1,167
    
    
    
    (196
    )
    
    
    (73
    )
    
    
    898
 For the Year Ended December 31, 2006WithoutWith
    
    
    
    
    
    
    
    
    
    
    ProportionalProportional
    
    
    
    
    
    
    
    
    
    
    ConsolidationConsolidation
    
    
    CIESA
    
    
    Distrilec
    
    
    (Unaudited)(in millions of pesos)Cash and cash equivalent at the beginning of
the year
    
    
    790
    
    
    
    (257
    )
    
    
    (59
    )
    
    
    474Net cash provided by operations
    
    
    2,877
    
    
    
    (326
    )
    
    
    (45
    )
    
    
    2,506Net cash used in investing activities
    
    
    (2,022
    )
    
    
    64
    
    
    
    70
    
    
    
    (1,888
    )Net cash (used) provided by financing activities
    
    
    (295
    )
    
    
    280
    
    
    
    (33
    )
    
    
    (48
    )Effect of exchange rate change on cash
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash and cash equivalent at the end of the year.
    
    
    1,350
    
    
    
    (239
    )
    
    
    (67
    )
    
    
    1,044
 For the Year Ended December 31, 2005WithoutWith
    
    
    
    
    
    
    
    
    
    
    ProportionalProportional
    
    
    
    
    
    
    
    
    
    
    ConsolidationConsolidation
    
    
    CIESA
    
    
    Distrilec
    
    
    (Unaudited)(in millions of pesos)Cash and cash equivalent at the beginning of
the year
    
    
    1,067
    
    
    
    (168
    )
    
    
    (53
    )
    
    
    846Net cash provided by operations
    
    
    1,998
    
    
    
    (299
    )
    
    
    (73
    )
    
    
    1,626Net cash used in investing activities
    
    
    (1,682
    )
    
    
    84
    
    
    
    54
    
    
    
    (1,544
    )Net cash used in financing activities
    
    
    (602
    )
    
    
    126
    
    
    
    13
    
    
    
    (463
    )Effect of exchange rate change on cash
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    9Cash and cash equivalent at the end of the year
    
    
    790
    
    
    
    (257
    )
    
    
    (59
    )
    
    
    474
  139




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##### Table of Contents



Item 6. DIRECTORS, SENIOR MANAGEMENT, AND EMPLOYEES
 
 DIRECTORS AND SENIOR MANAGEMENT
 Board of Directors
    Year first joinedYear of
    
    
    Petrobras
    
    
    
    
    
    
    TermName
    
    Appointment
    
    
    Energía
    
    
    Position
    
    
    ExpiresJosé Fernando de Freitas
    
    
    2008
    
    
    
    
    
    
    Chairman
    
    
    2009Daniel Lima de Oliveira
    
    
    2006
    
    
    
    
    
    
    Vice Chairman
    
    
    2008André Garcez Ghirardi
    
    
    2006
    
    
    
    
    
    
    Director
    
    
    2009Carlos Tadeu da Costa Fraga
    
    
    2006
    
    
    
    
    
    
    Director
    
    
    2008Christovam Penteado Sanches
    
    
    2008
    
    
    
    
    
    
    Director
    
    
    2008Venina Velosa da Fonseca
    
    
    2006
    
    
    
    
    
    
    Director
    
    
    2009Sydney Granja Affonso
    
    
    2006
    
    
    
    
    
    
    Director
    
    
    2008Cedric Bridger
    
    
    2004
    
    
    
    
    
    
    Director
    
    
    2009Ignacio R. Arrieta
    
    
    2007
    
    
    
    
    
    
    Director
    
    
    2008Santiago Montezanti
    
    
    2007
    
    
    
    
    
    
    Director
    
    
    2009Decio Fabricio Oddone da Costa
    
    
    2005
    
    
    
    2005
    
    
    Director
    
    
    2008Luis Miguel Sas
    
    
    2003
    
    
    
    1984
    
    
    Director
    
    
    2008Gustavo Adolfo Amaral
    
    
    2008
    
    
    
    2004
    
    
    Director
    
    
    2009Vilson Reichemback da Silva
    
    
    2005
    
    
    
    2004
    
    
    Director
    
    
    2009Adalberto Santiago Barbalho
    
    
    2007
    
    
    
    2007
    
    
    Director
    
    
    2008Claudio Fontes Nunes
    
    
    2006
    
    
    
    2006
    
    
    Director
    
    
    2009Miguel Angel Bibbó
    
    
    2008
    
    
    
    1990
    
    
    Director
    
    
    2008Héctor Daniel Casal
    
    
    2003
    
    
    
    1991
    
    
    Alternate Director
    
    
    2008María José van Morlegan
    
    
    2008
    
    
    
    
    
    
    Alternate Director
    
    
    2008
  
    
    The member is also a member of management or an employee of shareholders
who hold significant interests in the issuer, or of other entities in which these
shareholders hold either directly or indirectly significant interests or over which
these shareholders exercise a significant influence.
    
    The member is an employee of the issuer or has been an employee during
the last three years.
  140




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##### Table of Contents




    
    The member has professional relations or is part of a company or
professional association that maintains professional relations with, or that
receives remunerations or fees (other than directors fees) from, the issuer or
from its shareholders that hold either directly or indirectly significant interests
in or exercise a significant influence over the issuer, or from which such
shareholders hold either directly or indirectly significant interests or exercise a
significant influence.
    
    The member is either directly or indirectly a holder of significant
interests in the issuer or in an entity that has significant interests in or
exercises a significant influence over the issuer.
    
    The member sells or provides either directly or indirectly goods or
services to the issuer or to shareholders that hold either directly or indirectly
significant interests in or exercise a significant influence over the issuer and
receives compensation for such services that is substantially higher than that
received as a director.
    
    The member is married or is a family member, up to fourth degree by blood
or up to second degree by affinity, to an individual who would not qualify as
independent.
   José Fernando de Freitas
 Daniel Lima de Oliveira
  141




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André Garcez Ghirardi
 Carlos Tadeu da Costa Fraga
 Christovam Penteado Sanches
 Venina Velosa da Fonseca
 Sydney Granja Affonso
 Cedric Bridger
  142




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##### Table of Contents



Ignacio R. Arrieta
 Santiago L. Montezanti
 Decio Fabricio Oddone da Costa
 Luis Miguel Sas
 Gustavo Adolfo Amaral
  143




---



##### Table of Contents



Vilson Reichemback da Silva
 Adalberto Santiago Barbalho
 Claudio Fontes Nunes
 Miguel Angel Bibbó
 Héctor Daniel Casal
  144




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##### Table of Contents



María José van Morlegan
 Administration and Organization
   Our Executive Officers
  Name
    
    PositionDecio Fabricio Oddone da Costa
    
    Chief Executive OfficerLuis Miguel Sas
    
    Chief Financial OfficerGustavo Adolfo Amaral
    
    Director of Oil and Gas Exploration and Production Business SegmentAdalberto Santiago Barbalho
    
    Director of Refining and Petrochemicals Business SegmentsClaudio Fontes Nunes
    
    Director of Gas and Energy Business SegmentVilson Reichemback Da Silva
    
    Director of the Commercial Downstream Business SegmentMiguel Angel Bibbó
    
    Director of ServicesHéctor Daniel Casal
    
    Director of Legal AffairsJuan Kranner
    
    Executive Manager of Human ResourcesAlfredo Sergio Guia y Díaz
    
    Executive Manager of Planning and Management ControlPablo María Puiggari
    
    Executive Manager of CommunicationsJuan
Martín DAgostino
    
    Executive Manager of Quality, Environmental and Safety Occupational Health
  Juan Kranner
  145




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##### Table of Contents



Alfredo Sergio Guia y Diaz
 Pablo María Puiggari
 Juan
Martín DAgostino
 
 COMPENSATION
      146




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##### Table of Contents



BOARD PRACTICES
 Audit Committee
       
    
    To supervise the performance of the internal control systems, the
performance and reliability of the administrative and accounting system, the
reliability of the financial statements and all the financial information and the
disclosure of relevant events.
    
    To establish and supervise the implementation of procedures for the
reception, documentation and treatment of claims or reports on irregularities in
connection with accounting, internal control or auditing matters, on a confidential
and anonymous basis.
    
    To issue founded opinions with respect to transactions with related
parties as required by applicable law. To issue founded opinions whenever a
conflict of interest exists or may arise for us and to communicate this opinion to
self-regulated entities as required by the CNV.
  147




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##### Table of Contents




    
    To provide the market with complete information with respect to
transactions where members of the corporate bodies and / or controlling
shareholders of ours have conflicts of interests.
    
    To opine with respect to the reasonableness of the compensation and stock
option plans proposed by the Board of Director at the shareholders meetings.
    
    To opine with respect to the compliance of legal requirements and on the
reasonableness of proposals to issue shares or securities convertible into shares,
in the case of capital increases that exclude or limit preemptive rights.
    
    To issue at least once, at the time of submittal of the annual financial
statements, a report on the treatment given during the year to the matters under
its responsibility.
    
    To issue an opinion on the proposal submitted by the Board for the
appointment (or revocation) of the independent auditor and communicate it to the
shareholders meeting.
    
    To evaluate the qualifications and independence of the independent
auditors.
    
    To issue and maintain pre-approval procedures in connection with any
service (whether audit-related or not) to be provided by the independent auditor,
under which the Committee will be exclusively authorized to pre-approve any service
provided by the said Auditor.
    
    To evaluate the quality of our accounting standards and the main changes
to such accounting standards.
  Compensation Committee
    148




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##### Table of Contents



Statutory Syndic Committee
   First year ofName
    
    appointment
    
    
    PositionJuan Carlos Cincotta
    
    
    2004
    
    
    MemberJusto Federico Norman
    
    
    2003
    
    
    MemberRogelio Norberto Maciel
    
    
    2003
    
    
    MemberOlga M. Morrone de Quintana
    
    
    2004
    
    
    AlternateMariana P. Ardizzone
    
    
    2004
    
    
    AlternateMaría Laura Maciel
    
    
    2004
    
    
    Alternate
     Juan Carlos Cincotta
 Justo F. Norman
  149




---



##### Table of Contents



Rogelio N. Maciel
 Olga M. Morrone de Quintana
 Mariana P. Ardizzone
 Maria Laura Maciel
  
 EMPLOYEES
  As of December 31,2007
    
    
    2006
    
    
    2005Oil and Gas Exploration and Production
    
    
    813
    
    
    
    959
    
    
    
    1,053Refining and Distribution
    
    
    1,984
    
    
    
    1,967
    
    
    
    1,827Petrochemical
    
    
    1,272
    
    
    
    1,278
    
    
    
    1,255Gas and Energy
    
    
    118
    
    
    
    111
    
    
    
    104Corporate
    
    
    809
    
    
    
    813
    
    
    
    797Total
    
    
    4,996
    
    
    
    5,128
    
    
    
    5,036
   150




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##### Table of Contents



SHARE OWNERSHIP
  
 Item 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 
 MAJOR SHAREHOLDERS
    Class B Shares% of the TotalShareholder
    
    Number of Shares
    
    
    Outstanding SharesPetrobras Participaciones S.L.
    
    
    1,249,716,746
    
    
    
    58.6
    %
  
 RELATED PARTY TRANSACTIONS
      151




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##### Table of Contents



2007Current
    
    
    Non-currentTrade
    
    
    Other
    
    
    Accounts
    
    
    Other
    
    
    
    
    
    
    OtherCompany
    
    Receivables
    
    
    Receivables
    
    
    Payable
    
    
    Liabilities
    
    
    Loans
    
    
    receivables
    
    
    Investments
    
    
    LoansOleoducto de Crudos
Pesados Ltd.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    133
    
    
    
    Transportadora de Gas del
Sur S.A.
    
    
    4
    
    
    
    4
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Refinería del Norte S.A.
    
    
    9
    
    
    
    5
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Petrobras International
Finance Co.
    
    
    85
    
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Petróleo
Brasileiro S.A. 
Petrobras
    
    
    3
    
    
    
    2
    
    
    
    59
    
    
    
    11
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    Petrolera Entre Lomas S.A.
    
    
    
    
    
    
    
    
    
    
    71
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Propyme SGR
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    Petrobras Internacional 
Braspetro B.V.
    
    
    
    
    
    
    1,492
    
    
    
    
    
    
    
    
    
    
    
    178
    
    
    
    
    
    
    
    
    
    
    
    630Compañía Mega S.A.
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Petrobras Transporte
S.A.  Transpetro
    
    
    
    
    
    
    
    
    
    
    79
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Petrobras de Valores
    
    
    
    
    
    
    96
    
    
    
    
    
    
    
    
    
    
    
    128
    
    
    
    
    
    
    
    
    
    
    
    Internacional de España
S.LOther
    
    
    5
    
    
    
    10
    
    
    
    3
    
    
    
    4
    
    
    
    
    
    
    
    2
    
    
    
    4
    
    
    
    Total
    
    
    106
    
    
    
    1,621
    
    
    
    255
    
    
    
    15
    
    
    
    306
    
    
    
    5
    
    
    
    143
    
    
    
    630
  152




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##### Table of Contents



2006Current
    
    
    Non-currentTrade
    
    
    Other
    
    
    Accounts
    
    
    Other
    
    
    
    
    
    
    OtherCompany
    
    Receivables
    
    
    Receivables
    
    
    Payable
    
    
    Liabilities
    
    
    Loans
    
    
    receivables
    
    
    Investments
    
    
    LoansPetroquímica Cuyo S.A.
    
    
    11
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    Oleoducto de Crudos
Pesados Ltd.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    138
    
    
    
    Petrobras Bolivia
Refinación S.A.
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Transportadora de Gas del Sur S.A.
    
    
    10
    
    
    
    12
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Refinería del Norte S.A.
    
    
    3
    
    
    
    8
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Petrobras International
Finance Co.
    
    
    57
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Petróleo
Brasileiro S.A. 
Petrobras
    
    
    4
    
    
    
    5
    
    
    
    33
    
    
    
    11
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    Petrolera Entre Lomas S.A.
    
    
    
    
    
    
    
    
    
    
    71
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Propyme SGR
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    Petrobras Internacional 
Braspetro B.V.
    
    
    
    
    
    
    76
    
    
    
    2
    
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    768Other
    
    
    1
    
    
    
    14
    
    
    
    5
    
    
    
    16
    
    
    
    
    
    
    
    2
    
    
    
    3
    
    
    
    Total
    
    
    92
    
    
    
    117
    
    
    
    136
    
    
    
    27
    
    
    
    26
    
    
    
    5
    
    
    
    147
    
    
    
    768
  2007
    
    
    2006
    
    
    2005Company
    
    Purchases
    
    
    Sales
    
    
    Purchases
    
    
    Sales
    
    
    Purchases
    
    
    SalesOleoductos del Valle S.A.
    
    
    21
    
    
    
    
    
    
    
    23
    
    
    
    
    
    
    
    15
    
    
    
    Transportadora de Gas del Sur S.A.
    
    
    108
    
    
    
    35
    
    
    
    40
    
    
    
    34
    
    
    
    30
    
    
    
    Refinería del Norte S.A.
    
    
    108
    
    
    
    37
    
    
    
    142
    
    
    
    102
    
    
    
    122
    
    
    
    82Petrobras International Finance Co.
    
    
    426
    
    
    
    1,942
    
    
    
    101
    
    
    
    1,428
    
    
    
    118
    
    
    
    977Petroquímica Cuyo S.A.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33
    
    
    
    
    
    
    
    Petrolera Entre Lomas S.A.
    
    
    454
    
    
    
    1
    
    
    
    440
    
    
    
    1
    
    
    
    344
    
    
    
    1Petróleo Brasileiro S.A.
    
    
    95
    
    
    
    17
    
    
    
    102
    
    
    
    14
    
    
    
    
    
    
    
    10Petrobras Bolivia Refinación S.A.
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    33
    
    
    
    3
    
    
    
    34Copesul
    
    
    1,247
    
    
    
    
    
    
    
    1,032
    
    
    
    
    
    
    
    918
    
    
    
    Petrobras Paraguay Refinación Ltd.
    
    
    
    
    
    
    95
    
    
    
    
    
    
    
    42
    
    
    
    
    
    
    
    Petrobras
Transporte S.A.  Transpetro
    
    
    79
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    2,538
    
    
    
    2,137
    
    
    
    1,880
    
    
    
    1,687
    
    
    
    1,550
    
    
    
    1,104
  
 Item 8. FINANCIAL INFORMATION
 
 CONSOLIDATED FINANCIAL STATEMENTS
  
 LEGAL PROCEEDINGS
   153




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##### Table of Contents



DIVIDENDS
  1.
    
    5% is allocated to a legal reserve until the legal reserve equals 20% of our outstanding
capital,2.
    
    to compensation of the members of the Board of Directors and Statutory Audit Committee, and3.
    
    to dividends on preferred stock, if any, and then to dividends on common stock
or to a voluntary reserve or contingency reserve or to a new account, or as otherwise
determined by the ordinary shareholders meeting.
     
 Item 9. OFFER AND LISTING
 
 OFFER AND LISTING DETAILS
   154




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##### Table of Contents



ADS(1)
    
    
    Class B share(2)High
    
    
    Low
    
    
    High
    
    
    LowFull Year2002
    
    
    12.60
    
    
    
    3.60
    
    
    
    2.83
    
    
    
    1.422003
    
    
    11.25
    
    
    
    6.52
    
    
    
    3.34
    
    
    
    1.992004
    
    
    14.14
    
    
    
    8.80
    
    
    
    4.13
    
    
    
    2.652005
    
    
    16.28
    
    
    
    10.95
    
    
    
    4.64
    
    
    
    3.202006
    
    
    13.33
    
    
    
    9.85
    
    
    
    4.08
    
    
    
    3.022007
    
    
    14.75
    
    
    
    8.27
    
    
    
    4.09
    
    
    
    2.61Quarterly2005First Quarter
    
    
    14.47
    
    
    
    10.98
    
    
    
    4.16
    
    
    
    3.25Second Quarter
    
    
    12.59
    
    
    
    10.95
    
    
    
    3.63
    
    
    
    2.20Third Quarter
    
    
    16.17
    
    
    
    11.43
    
    
    
    4.64
    
    
    
    3.22Fourth Quarter
    
    
    16.28
    
    
    
    11.45
    
    
    
    4.61
    
    
    
    3.512006First Quarter
    
    
    13.33
    
    
    
    11.10
    
    
    
    4.08
    
    
    
    3.40Second Quarter
    
    
    12.70
    
    
    
    9.85
    
    
    
    3.83
    
    
    
    3.02Third Quarter
    
    
    11.50
    
    
    
    9.97
    
    
    
    3.52
    
    
    
    3.09Fourth Quarter
    
    
    12.19
    
    
    
    10.05
    
    
    
    3.53
    
    
    
    3.112007First Quarter
    
    
    12.12
    
    
    
    9.90
    
    
    
    3.70
    
    
    
    3.02Second Quarter
    
    
    11.63
    
    
    
    10.27
    
    
    
    3.52
    
    
    
    3.14Third Quarter
    
    
    12.14
    
    
    
    8.27
    
    
    
    3.69
    
    
    
    2.61Fourth Quarter
    
    
    14.75
    
    
    
    9.83
    
    
    
    4.09
    
    
    
    3.13MonthlyNovember 2007
    
    
    11.87
    
    
    
    10.60
    
    
    
    3.67
    
    
    
    3.32December 2007
    
    
    14.75
    
    
    
    11.40
    
    
    
    4.09
    
    
    
    3.54January 2008
    
    
    16.00
    
    
    
    11.43
    
    
    
    5.13
    
    
    
    3.58February 2008
    
    
    12.38
    
    
    
    11.37
    
    
    
    3.92
    
    
    
    3.66March 2008
    
    
    11.64
    
    
    
    10.31
    
    
    
    3.74
    
    
    
    3.37April 2008
    
    
    13.25
    
    
    
    11.65
    
    
    
    4.26
    
    
    
    3.69May 2008
    
    
    14.54
    
    
    
    12.55
    
    
    
    4.73
    
    
    
    4.07
 (1)
    
    Amounts expressed in U.S. dollars.(2)
    
    Amounts expressed in Argentine pesos. 
 MARKETS
 Buenos Aires Stock Market
   155




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##### Table of Contents



2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Market capitalization (billions of pesos)
    
    
    1,773
    
    
    
    1,229
    
    
    
    771
    
    
    
    690
    
    
    
    543.3
    
    
    
    348.1
    
    
    
    192.5As percent of GDP(1)
    
    
    227
    %
    
    
    183
    %
    
    
    145
    %
    
    
    152
    %
    
    
    144
    %
    
    
    111
    %
    
    
    71
    %Volume (in millions of pesos)
    
    
    23,001
    
    
    
    16,089
    
    
    
    19,938
    
    
    
    14,113
    
    
    
    8,844
    
    
    
    4,117
    
    
    
    7,519Average daily trading volume (in
millions of pesos)
    
    
    93.12
    
    
    
    64.89
    
    
    
    79.12
    
    
    
    56
    
    
    
    35.52
    
    
    
    17.5
    
    
    
    30.9Number of listed companies(1)
    
    
    93
    
    
    
    86
    
    
    
    87
    
    
    
    85
    
    
    
    110
    
    
    
    117
    
    
    
    119
 (1)
    
    End-of-period figures for trading on the Buenos Aires Stock Exchange.  
 Item 10. ADDITIONAL INFORMATION
 
 MEMORANDUM AND ARTICLES OF ASSOCIATION
 Register
 Inspección General de
Justicia or IGJ
 Objects and Purposes
   156




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##### Table of Contents



Provisions of the By-laws Relating to Directors
  Capital Stock
  Voting Rights
  Transfers of Class A Shares
  Cumulative Voting
  Preemptive Rights
  obligaciones
negociables
  157




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##### Table of Contents



Appraisal Rights
   Acquisition of Class B Shares by Class B Shareholders
  Capital Increases and Reductions
    158




---



##### Table of Contents



Redemption and Repurchase
   Preferred Shares
  Liquidation
  Changes in Shareholder Rights
  Audit Committee
  Meetings of Shareholders
 General
   159




---



##### Table of Contents



Notices
   Quorum and Voting Requirements
    Conflict of Interest
  Limitations on Foreign Investment in Argentina
   160




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##### Table of Contents



Change of Control
  
 COMPARISON OF NEW YORK STOCK EXCHANGE CORPORATE GOVERNANCE STANDARDS
AND OUR CORPORATE GOVERNANCE PRACTICE
  
 MATERIAL CONTRACTS
    161




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##### Table of Contents



TAXATION
 Argentine Taxes
 General
    Income Tax
 Capital gains
  Dividends
     162




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##### Table of Contents



Capital reductions and other distributions
  Tax on personal property
    Other taxes
      163




---



##### Table of Contents



United States Federal Income Taxes
 General
    Taxation of our ADSs
 Distributions
    164




---



##### Table of Contents



Sale, exchange or other disposition
   Backup withholding
   165




---



##### Table of Contents



DOCUMENTS ON DISPLAY
  
 Item 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   Qualitative Disclosures
    Commodity price risk
    Foreign exchange risk
    166




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##### Table of Contents



Interest rate risks
    Quantitative Disclosure
  Foreign Currency Exchange Rate Risk and Interest Rate Risk
 Expected MaturityEstimated2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    Thereafter
    
    
    Total
    
    
    Fair Value(in millions of pesos)Short-and Long-Term Debt
U.S. dollar:Fixed Rate
    
    
    1,247
    
    
    
    572
    
    
    
    1,100
    
    
    
    
    
    
    
    
    
    
    
    2,206
    
    
    
    5,125
    
    
    
    5,174Average interest rate (%)
    
    
    5.91
    
    
    
    9.00
    
    
    
    8.13
    
    
    
    
    
    
    
    
    
    
    
    7.88
    
    
    
    
    
    
    
    Variable rate
    
    
    196
    
    
    
    82
    
    
    
    120
    
    
    
    334
    
    
    
    65
    
    
    
    3
    
    
    
    800
    
    
    
    800Average interest rate (%)
    
    
    6.25
    
    
    
    6.67
    
    
    
    6.47
    
    
    
    6.13
    
    
    
    6.63
    
    
    
    6.58
    
    
    
    
    
    
    
    Total
    
    
    1,443
    
    
    
    654
    
    
    
    1,220
    
    
    
    334
    
    
    
    65
    
    
    
    2,209
    
    
    
    5,925
    
    
    
    5,974
  Short-Term debt
    
    
    Long-Term debt
    
    
    TotalDebt obligations(1) without proportional consolidation
    
    
    1,443
    
    
    
    4,482
    
    
    
    5,925PEPSAs interest in Distrilecs debt obligations
    
    
    9
    
    
    
    131
    
    
    
    140PEPSAs interest in CIESAs debt obligations
    
    
    470
    
    
    
    817
    
    
    
    1,287Debt obligations(2) with proportional consolidation
    
    
    1,922
    
    
    
    5,430
    
    
    
    7,352
 (1)
    
    As reported in tabular presentation.(2)
    
    As reported in the consolidated balance sheet of our financial statements.  167




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##### Table of Contents



Items 12-14. NOT APPLICABLE
 PART II
 
 Item 15. CONTROLS AND PROCEDURES
 (a) Disclosure Controls and Procedures
  (b) Managements Annual Report on Internal Control over Financial Reporting
 
    ,
 (c) Scope of Managements Report on Internal Control over Financial Reporting
   168




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##### Table of Contents



(d) Changes in Internal Control over Financial Reporting
  (e) New Developments on Internal Controls Over Financial Reporting
  
 Item 16A. AUDIT COMMITTEE FINANCIAL EXPERT
  
 Item 16B. CODE OF ETHICS
  
 Item 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
 Audit and Non-Audit Fees
  Year ended December 31,2007
    
    
    2006(in thousands of pesos)Audit fees
    
    
    9,539
    
    
    
    8,409
    (1)Audit-related fees
    
    
    2,190
    
    
    
    1,505
    (2)Tax fees
    
    
    
    
    
    
    271
    (3)Total fees
    
    
    11,729
    
    
    
    10,185
 (1)
    
    Includes P$1,610 million corresponding to the Fees of Ernst & Young Global, our
independent auditor until March 2006.(2)
    
    Includes P$557 million corresponding to the Fees of Ernst & Young Global, our
independent auditor until March 2006.(3)
    
    Corresponds to fees paid to Ernst & Young Global, our independent auditor until
March 2006. Audit fees.
  169




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Audit-related fees.
 Tax fees.
 Independent Auditors.
  Audit Committee Pre-Approval Policies and Procedures
  
 Item 16D. NOT APPLICABLE
 
 Item 16E. PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
  
 Item 17. NOT APPLICABLE
 
 Item 18. FINANCIAL STATEMENTS
   170




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Item 19. EXHIBITS
  Exhibit
    
    
    
    Incorporated by Reference
    
    FiledNumber
    
    Description
    
    Form
    
    Date
    
    Number
    
    Herewith1.1
    
    English translation
of Estatutos
(by-laws) of
Petrobras Energía
Participaciones
S.A.
    
    20-F
    
    6/30/05
    
    
    1.12.1
    
    Form of Deposit
Agreement among
Petrobras Energía
Participaciones
S.A. (formerly PC
Holdings S.A.),
Citibank, N.A., as
depositary, and the
Holders and
Beneficial Owners
of American
Depositary Shares
evidenced by
American Depositary
Receipts issued
thereunder,
including the form
of American
Depositary Receipt.
    
    F-4
    
    11/15/99
    
    
    4.22.2
    
    Amended and
Restated Indenture,
dated August 1,
2002, amending and
restating the
Indenture dated May
1, 1998, between
Petrobras Energía
and Citibank, N.A.
    
    20-F
    
    6/30/03
    
    
    2.114.1
    
    Restructuring
Agreement dated as
of September 1,
2005 among Compañía
de Inversiones de
Energía S.A.,
Petrobras Energía
S.A., Petrobras
Hispano Argentina
S.A., Enron
Pipeline Company
Argentina S.A., ABN
AMRO BANK N.V.
Sucursal Argentina,
and the Creditors
named therein.
    
    20-F
    
    6/29/06
    
    
    4.44.2
    
    Third Amendment to
the Restructuring
Agreement dated as
of March 25, 2008
among Compañía de
Inversiones de
Energía S.A.,
Petrobras Energía
S.A., Petrobras
Hispano Argentina
S.A., Enron
Pipeline Company
Argentina S.A., ABN
AMRO BANK N.V.
Sucursal Argentina,
and AEI.
    
    
    
    
    
    
    
    
    
    X4.3
    
    Loan Agreement
Number 0088/2005,
dated February 21,
2005, between
Petrobras Energía,
as borrower, and
Petrobras
International
Braspetro BV., as
lender (English
translation).
    
    20-F
    
    6/30/05
    
    
    2.164.4
    
    Loan Agreement,
dated February 14,
2008, between
Petrobras
International
Braspetro BV., as
borrower, and World
Fund Financial
Services, as lender
(English
translation).
    
    
    
    
    
    
    
    
    
    X
  171




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Exhibit
    
    
    
    Incorporated by Reference
    
    FiledNumber
    
    Description
    
    Form
    
    Date
    
    Number
    
    Herewith4.5
    
    Loan Agreement,
dated February 21,
2008, between
Petrobras
International
Braspetro BV., as
borrower, and World
Fund Financial
Services, as lender
(English
translation).
    
    
    
    
    
    
    
    
    
    X4.6
    
    Loan Agreement,
dated February 29,
2008, between
Petrobras
International
Braspetro BV., as
borrower, and World
Fund Financial
Services, as lender
(English
translation).
    
    
    
    
    
    
    
    
    
    X4.7
    
    Stock Purchase
Agreement, dated
December 21, 2007,
between Petrobras
Energía, S.A., as
seller, and
Petrobras
International
Braspetro BV, as
purchaser.
    
    
    
    
    
    
    
    
    
    X8.1
    
    List of
significant
subsidiaries of
Petrobras Energía
as defined in
Rule 1-02(w) of
Regulation S-X.
    
    
    
    
    
    
    
    
    
    X12.1
    
    CEO Certification
pursuant to Section
302 of the
Sarbanes-Oxley Act
of 2002, dated June
27, 2008.
    
    
    
    
    
    
    
    
    
    X12.2
    
    CFO Certification
pursuant to Section
302 of the
Sarbanes-Oxley Act
of 2002, dated June
27, 2008.
    
    
    
    
    
    
    
    
    
    X13.1
    
    CEO Certification
furnished pursuant
to Section 906 of
the Sarbanes-Oxley
Act of 2002, dated
June 27, 2008.
    
    
    
    
    
    
    
    
    
    X13.2
    
    CFO Certification
furnished pursuant
to Section 906 of
the Sarbanes-Oxley
Act of 2002, dated
June 27, 2008.
    
    
    
    
    
    
    
    
    
    X
   172




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SIGNATURES
  PETROBRAS ENERGÍA PARTICIPACIONES S.A.By:
    /s/ Decio Fabricio Oddone da CostaName:
    Decio Fabricio Oddone da CostaTitle:
    Chief Executive OfficerBy:
    /s/ Luis Miguel SasName:
    Luis Miguel SasTitle:
    Chief Financial Officer   173




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INDEX TO FINANCIAL STATEMENTS
 PETROBRAS ENERGIA PARTICIPACIONES S.A.
 Report of independent registered public accounting firm of Petrobras Energía Participaciones S.A. on
the Consolidated Financial Statements as of December 31, 2007 and 2006
    
    
    F-3Report of independent registered public accounting firm of Petrobras Energía Participaciones S.A on
Internal Control over Financial Reporting as of December 31, 2007
    
    
    F-5Report of independent registered public accounting firm of Petrobras Energía Participaciones S.A. on
the Consolidated Financial Statements as of December 31, 2005 and 2004
    
    
    F-7Report of independent registered public accounting firm of Distrilec Inversora S.A.
    
    
    F-9Report of independent registered public accounting firm of Petroritupano S.A
    
    
    F-10Report of independent registered public accounting firm of Compañia de Inversiones de Energía S.A.
    
    
    F-11Report of independent registered public accounting firm of Compañia Inversora en Transmisión
Eléctrica Citelec S.A.
    
    
    F-12Report of independent registered public accounting firm of Refinería del Norte S.A.
    
    
    F-13Consolidated statements of income and loss for the years ended December 31, 2007, 2006 and 2005
    
    
    F-14Consolidated balance sheets as of December 31, 2007 and 2006
    
    
    F-15Statements of changes in shareholders equity for the years ended December 31, 2007, 2006
and 2005
    
    
    F-16Consolidated statements of cash flows for the years ended December 31, 2007, 2006 and 2005
    
    
    F-17Notes to the consolidated financial statements for the years ended 2007, 2006 and 2005
    
    
    F-18REFINERIA DEL NORTE S.A.Statements of income and loss for the years ended December 31, 2007 and 2006 (unaudited)
    
    
    F-104Balance sheets as of December 31, 2007 and 2006 (unaudited)
    
    
    F-105Statements of changes in shareholders equity for the years ended December 31, 2007 and 2006
(unaudited)
    
    
    F-106Statements of cash flows for the years ended December 31, 2007 and 2006 (unaudited)
    
    
    F-107Notes to the financial statements for the years ended 2007 and 2006 (unaudited)
    
    
    F-108
  F-1




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Statements of income and loss for the years ended December 31, 2005, 2004 and 2003
    
    
    F-125Balance sheets as of December 31, 2005 and 2004
    
    
    F-126Statements of changes in shareholders equity for the years ended December 31, 2005, 2004
and 2003
    
    
    F-127Statements of cash flows for the years ended December 31, 2005, 2004 and 2003
    
    
    F-128Notes to the financial statements for the years ended 2005, 2004 and 2003
    
    
    F-129PETRORITUPANO S.A.Statements
of income and loss for the years ended December 31, 2007 and
2006 (unaudited)
    
    
    F-148Balance
sheets as of December 31, 2007 and 2006 (unaudited)
    
    
    F-149Statements
of changes in shareholders equity for the years ended
December 31, 2007 and 2006 (unaudited)
    
    
    F-150Statements
of cash flows for the years ended December 31, 2007 and 2006
(unaudited)
    
    
    F-151Notes
to the financial statements for the years ended 2007 and 2006
(unaudited)
    
    
    F-152
  F-2




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Report of Independent Registered Public Accounting Firm
 
 1.
    
    We have audited the accompanying consolidated balance sheets of Petrobras Energía
Participaciones S.A. and subsidiaries as of December 31, 2007 and 2006 and the related
consolidated statements of income, changes in shareholders equity and cash flows for each of
the years then ended. These consolidated financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit. We did not audit the consolidated financial
statements of Distilec Inversora S.A. (Distrilec) as of December 31, 2007 nor did we audit
the consolidated financial statements of Compañía de Inversiones de Energía S.A. (CIESA) as
of December 31, 2006, jointly-controlled affiliates proportionally consolidated by Petrobras
Energía Participaciones S.A. (PEPSA). The financial statements of Distrilec and of CIESA
incorporated by the proportional consolidation method, before considering the adjustments
mentioned in Note 9 to the consolidated financial statements, reflect total assets
constituting eight percent and thirteen percent and total net revenues constituting seven
percent and six percent, respectively, of the related consolidated totals. The financial
statements of Distrilec and of CIESA were audited by other auditors whose reports were
furnished to us, and our opinion, insofar as it relates to the amounts included for Distrilec
and CIESA, is based solely on the reports of the other auditors. The foregoing report of the
other auditors of CIESA includes an explanatory paragraph for going concern uncertainties.
 2.
    
    We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits and the reports of the
other auditors provide a reasonable basis for our opinion.
 3.
    
    The reports of the other auditors on the 2006 consolidated financial statements of CIESA,
presented herein, was qualified because CIESA did not recognize the effects of the changes in
the purchasing power of the Argentine peso from March 1 to September 30, 2003. In the opinion
of the other auditors, the professional accounting principles in Argentina, as approved by the
Professional Council of Economic Sciences of the City of Buenos Aires, require the recognition
of such effects, but this recognition is not allowed by the related regulations of the
National Securities Commission of Argentina. The effect of such departure from generally
accepted accounting principles in Argentina, as approved by the Professional Council of
Economic Sciences of the City of Buenos Aires is not material for the accompanying
consolidated financial statements of Petrobras Energía Participaciones S.A. and subsidiaries.
 4.
    
    In our opinion, based on our audits and the reports of the other auditors, the consolidated
financial statements referred to above present fairly, in all material respects, the financial
position of Petrobras Energía Participaciones S.A. and subsidiaries as of December 31, 2007
and 2006, and the results of their operations and their cash flows for each of the years then
ended, in conformity with generally accepted accounting principles in Argentina, as approved by
the Professional Council of Economic Sciences of the City of Buenos Aires.
  F-3




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5.
    
    Generally accepted accounting principles in Argentina, as approved by the Professional
Council of Economic Sciences of the City of Buenos Aires vary in certain significant respects
from U.S. generally accepted accounting principles. Information relating to the nature and
effect of such differences is presented in Notes 21, 22 and 23 to the consolidated financial
statements.
 6.
    
    We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), Petrobras Energía Participaciones S.A.s internal control
over financial reporting as of December 31, 2007, based on the criteria established in
Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO), and our report dated June 27, 2008 expressed an unqualified
opinion on the effectiveness of the Companys internal control over financial reporting.
 
 
 Partner
  F-4




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Report of Independent Registered Public Accounting Firm
 
     .
  F-5




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Partner
  F-6




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 1.
    
    We have audited the accompanying consolidated balance sheets of Petrobras Energía
Participaciones S.A. (an Argentine Corporation) and its subsidiaries as of December 31, 2005,
and the related consolidated statements of income, changes in shareholders equity and cash
flows for each of the two years in the period ended December 31, 2005. These financial
statements are the responsibility of the Companys management. Our responsibility is to
express an opinion on these financial statements based on our audits.
 2.
    
    The financial statements of the affiliates Compañía Inversora en Transmisión Eléctrica
Citelec S.A. (Citelec) and Compañía de Inversiones de Energía S.A. (CIESA) as of December 31,
2005, and for each of the two years in the period ended December 31, 2005 and Transportadora
de Gas del Sur S.A. as of and for the year ended December 31, 2004, have been audited by other
auditors whose reports have been furnished to us, and our opinion, insofar as it relates to
the amounts included for those affiliates, before considering the adjustments mentioned in
note 9 to the consolidated financial statements, is based solely on the reports of the other
auditors, one of which includes an explanatory paragraph for going concern uncertainties as
explained in paragraph 7. The Companys share in the total assets and sales included in the
financial statements of CIESA which have been proportionally consolidated, represents 14% of
consolidated total assets as of December 31, 2005, and 5% and 6% of consolidated net sales for
the years ended December 31, 2005 and 2004, respectively. The Companys investment in the
other affiliates, which have been accounted for using the equity method, is stated at
Argentine pesos 288 million as of December 31, 2005, and the Companys equity in the
affiliates net income/loss is stated at Argentine pesos 172 million-income and Argentine
pesos 31 million-loss for the years ended December 31, 2005 and 2004, respectively, before
considering the adjustments discussed in note 9 to the consolidated financial statements.
 3.
    
    We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). These standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. We were not engaged to perform an audit of the Companys internal control over
financial reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the Companys
internal control over financial reporting. Accordingly, we express no such opinion. An audit
also includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation. We believe
that our audits and the reports of other auditors provide a reasonable basis for our opinion.
 4.
    
    Our original report on the consolidated financial statements of Petrobras Energía
Participaciones S.A. and its subsidiaries as of December 31, 2005 and 2004 included a
qualification for not discounting the nominal values of the deferred tax assets and
liabilities, which as of December 2005 and 2004 was required by generally accepted accounting
principles effective in Argentina, as approved by the Professional Council of Economic
Sciences of the City of Buenos Aires. Such standards have been amended and currently allow
such nominal values not to be discounted. Accordingly, our present opinion over those
financial statements, as presented herein, is unqualified rather than qualified.
 5.
    
    In our opinion, based on our audits and the reports of other auditors referred to in
paragraph 2, the financial statements referred to in paragraph 1 present fairly, in all
material respects, the consolidated financial position of Petrobras Energía Participaciones
S.A. and its subsidiaries as of December 31, 2005, and the consolidated results of their
operations and their cash flows for each of the two years in the period ended December 31,
2005, in conformity with the pertinent regulations of the Business Association Law, the
National Securities Commission and generally accepted accounting principles effective in
Argentina, as approved by the Professional Council of Economics Sciences of the City of Buenos
Aires, applicable to consolidated financial statements, which differ in certain respects from
US generally accepted accounting principles (see notes 21 through 23 to the consolidated
financial statements).
  F-7




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6.
    
    As discussed in note 2, the Company has restated the financial statements as of December 31,
2005 and for each of the two years in the period ended December 2005 to reflect a change in
accounting principles.
 7.
    
    The financial statements and the reports of the other auditors of the affiliate CIESA as of
December 31, 2005 and for the years ended December 31, 2005 and 2004 state that they have been
prepared assuming that such affiliate will continue as a going concern. CIESA, which has been
proportionally consolidated, represents assets constituting 14% as of December 31, 2005, and
net sales constituting 5% and 6% for the years ended December 31, 2005 and 2004, respectively,
of the respective consolidated totals. As discussed in note 9 to the consolidated financial
statements, CIESA and its subsidiary Transportadora de Gas del Sur S.A. have been negatively
impacted by the Argentine Governments adoption of various economic measures including the
de-dollarization of revenue rates, the renegotiation of License and Concession contracts and
the devaluation of the Argentine peso. In addition, CIESA has suspended the payment of its
financial debt. These circumstances raise substantial doubt about the
affiliates ability to
continue as a going concern. The affiliate managements plans in regard of these matters are
also described in note 9 to the consolidated financial statements. The accompanying
consolidated financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
 
 PISTRELLI, HENRY MARTIN Y ASOCIADOS S.R.L.(Member firm of Ernst & Young Global)ENRIQUE C. GROTZPartner
  F-8




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Report of Independent Registered Public Accounting Firm
 
     DELOITTE & Co. S.R.L.
 
  F-9




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Report of Independent Registered Public Accounting Firm
 To the Stockholders and Board of Directors of

Petroritupano, S. A.: We have audited the accompanying balance sheet of Petroritupano, S. A. as of December 31, 2007 and the related
statements of income, stockholders equity, and cash flows for the year then ended. These financial statements are the
responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements
based on our audit. We conducted our audit in accordance with generally accepted auditing standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial
position of Petroritupano, S. A. as of December 31, 2007, and the results of its operations and its cash flows for the
year then ended in conformity with International Financial Reporting Standards. ALCARAZ CABRERA VAZQUEZ Victor J. Uzcátegui Camacho

Public Accountant

C.P.A N°30.059 June 2, 2008  F-10




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
       
  F-11




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Report of Independent Registered Public Accounting Firm
 
      
  F-12




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    
 PISTRELLI, HENRY MARTIN Y ASOCIADOS S.R.L.(Member firm of Ernst & Young Global)GERMAN E. CANTALUPIPartner
  F-13




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PETROBRAS
ENERGIA PARTICIPACIONES AND SUBSIDIARIES AND COMPANIES UNDER JOINT
CONTROL
 
 CONSOLIDATED
 STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(Stated in millions of Argentine pesos)
 2007
    
    
    2006
    
    
    2005Net sales
    
    
    13,458
    
    
    
    11,745
    
    
    
    10,655Costs of sales (Note 26.c)
    
    
    (10,132
    )
    
    
    (8,068
    )
    
    
    (6,851
    )Gross profit
    
    
    3,326
    
    
    
    3,677
    
    
    
    3,804Administrative and selling expenses (Note 26.e)
    
    
    (1,444
    )
    
    
    (1,277
    )
    
    
    (1,136
    )Exploration expenses (Note 26.e)
    
    
    (172
    )
    
    
    (117
    )
    
    
    (34
    )Other operating expenses, net (Note 17.c)
    
    
    (177
    )
    
    
    (135
    )
    
    
    (329
    )Operating income
    
    
    1,533
    
    
    
    2,148
    
    
    
    2,305Equity in earnings of affiliates (Note 9.b)
    
    
    176
    
    
    
    219
    
    
    
    281Financial income (expenses) and holding gains (losses)Generated by assets:Interest
    
    
    96
    
    
    
    108
    
    
    
    88Exchange difference
    
    
    110
    
    
    
    49
    
    
    
    53Holding gains (Note 26.c)
    
    
    86
    
    
    
    25
    
    
    
    40Holding gains and income from the sale of listed shares and government securities
    
    
    33
    
    
    
    49
    
    
    
    (4
    )Other financial expenses, net
    
    
    (34
    )
    
    
    (6
    )
    
    
    (2
    )291
    
    
    
    225
    
    
    
    175Generated by liabilities:Interest
    
    
    (587
    )
    
    
    (611
    )
    
    
    (586
    )Exchange difference
    
    
    (118
    )
    
    
    (65
    )
    
    
    (84
    )Derivatives
    
    
    
    
    
    
    
    
    
    
    (332
    )Other financial expenses, net
    
    
    (81
    )
    
    
    (55
    )
    
    
    (72
    )(786
    )
    
    
    (731
    )
    
    
    (1,074
    )Other income (expenses), net (Note 17.d)
    
    
    130
    
    
    
    93
    
    
    
    (459
    )Income before income tax and minority interest in subsidiaries
    
    
    1,344
    
    
    
    1,954
    
    
    
    1,228Income tax (Note 12)
    
    
    (494
    )
    
    
    (465
    )
    
    
    (211
    )Minority interest in subsidiaries
    
    
    (277
    )
    
    
    (425
    )
    
    
    (288
    )Net income
    
    
    573
    
    
    
    1,064
    
    
    
    729Basic/diluted earnings per share  Stated in Argentine pesos
    
    
    0.270
    
    
    
    0.501
    
    
    
    0.343
   F-14




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PETROBRAS
ENERGÍA PARTICIPACIONES AND SUBSIDIARIES AND COMPANIES UNDER
JOINT CONTROL
 
 CONSOLIDATED
BALANCE SHEETS
AS OF DECEMBER 31, 2007 AND 2006
(Stated in millions of Argentine pesos)
 2007
    
    
    2006CURRENT ASSETSCash
    
    
    98
    
    
    
    86Investments (Note 9.a)
    
    
    1,094
    
    
    
    1,479Trade receivables
    
    
    1,605
    
    
    
    1,438Other receivables (Note 17.a)
    
    
    2,473
    
    
    
    1,182Inventories (Note 8)
    
    
    1,182
    
    
    
    888Other assets
    
    
    
    
    
    
    1Total current assets
    
    
    6,452
    
    
    
    5,074NON-CURRENT ASSETSTrade receivables
    
    
    228
    
    
    
    124Other receivables (Note 17.a)
    
    
    657
    
    
    
    691Inventories (Note 8)
    
    
    100
    
    
    
    81Investments (Note 9.a)
    
    
    3,270
    
    
    
    3,630Property, plant and equipment (Note 26.a)
    
    
    10,609
    
    
    
    10,838Other assets
    
    
    41
    
    
    
    41Total non-current assets
    
    
    14,905
    
    
    
    15,405Total assets
    
    
    21,357
    
    
    
    20,479CURRENT LIABILITIESAccounts payable
    
    
    1,867
    
    
    
    1,603Short-term debt (Note 10)
    
    
    1,922
    
    
    
    2,646Payroll and social security taxes
    
    
    261
    
    
    
    276Taxes payable
    
    
    242
    
    
    
    331Reserves (Note 13)
    
    
    124
    
    
    
    95Other liabilities (Note 17.b)
    
    
    305
    
    
    
    214Total current liabilities
    
    
    4,721
    
    
    
    5,165NON-CURRENT LIABILITIESAccounts payable
    
    
    78
    
    
    
    49Long-term debt (Note 10)
    
    
    5,430
    
    
    
    4,716Payroll and social security taxes
    
    
    60
    
    
    
    36Taxes payable
    
    
    1,428
    
    
    
    1,492Reserves (Note 13)
    
    
    86
    
    
    
    85Other liabilities (Note 17.b)
    
    
    307
    
    
    
    366Total non-current liabilities
    
    
    7,389
    
    
    
    6,744Total liabilities
    
    
    12,110
    
    
    
    11,909MINORITY INTEREST IN SUBSIDIARIES
    
    
    2,583
    
    
    
    2,350SHAREHOLDERS EQUITY
    
    
    6,664
    
    
    
    6,22021,357
    
    
    
    20,479
   F-15




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##### Table of Contents



PETROBRAS
ENERGÍA PARTICIPACIONES AND SUBSIDIARIES AND COMPANIES UNDER
JOINT CONTROL
 
 STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(Stated in millions of Argentine pesos)
 2007
    
    
    2006
    
    
    2005Capital stock
    
    
    Retained earningsAdjustment
    
    
    Additional
    
    
    
    
    
    
    Unappropriated
    
    
    
    
    
    
    DeferredCapital
    
    
    to capital
    
    
    paid-in
    
    
    Legal
    
    
    retained
    
    
    Treasury
    
    
    (loss)stock
    
    
    stock
    
    
    capital
    
    
    reserve
    
    
    earnings
    
    
    stock (a)
    
    
    income (a)
    
    
    Total
    
    
    Total
    
    
    TotalBalances at the beginning of the year
    
    
    2,132
    
    
    
    2,554
    
    
    
    160
    
    
    
    122
    
    
    
    1,306
    
    
    
    (33
    )
    
    
    (21
    )
    
    
    6,220
    
    
    
    6,124
    
    
    
    5,511Adjustments to prior years (Note 2.f)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (969
    )
    
    
    (1,112
    )Modified balances at the beginning of the year
    
    
    2,132
    
    
    
    2,554
    
    
    
    160
    
    
    
    122
    
    
    
    1,306
    
    
    
    (33
    )
    
    
    (21
    )
    
    
    6,220
    
    
    
    5,155
    
    
    
    4,399Shareholders Meeting decisions of March 30, 2007- Legal Reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Advanced cash dividends approved by the Board of
Directors meeting held on August 7, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (141
    )
    
    
    
    
    
    
    
    
    
    
    (141
    )
    
    
    Deferred income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    12
    
    
    
    1
    
    
    
    27Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    573
    
    
    
    
    
    
    
    
    
    
    
    573
    
    
    
    1,064
    
    
    
    729Balances at the end of the year
    
    
    2,132
    
    
    
    2,554
    
    
    
    160
    
    
    
    128
    
    
    
    1,732
    
    
    
    (33
    )
    
    
    (9
    )
    
    
    6,664
    
    
    
    6,220
    
    
    
    5,155
 (a)
    
    See Note 4.m).   F-16




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##### Table of Contents



PETROBRAS
ENERGÍA PARTICIPACIONES AND SUBSIDIARIES AND COMPANIES UNDER
JOINT CONTROL
 
 CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(Stated in millions of Argentine pesos)
 2007
    
    
    2006
    
    
    2005Cash provided by (used in) operations:Net income
    
    
    573
    
    
    
    1,064
    
    
    
    729Reconciliation to net cash provided by (used in) operating activities:Minority interest in subsidiaries
    
    
    277
    
    
    
    425
    
    
    
    288Equity in earnings of affiliates
    
    
    (176
    )
    
    
    (219
    )
    
    
    (281
    )Financial expenses, net
    
    
    51
    
    
    
    (24
    )
    
    
    29Depreciation of property, plant and equipment
    
    
    1,217
    
    
    
    1,121
    
    
    
    1,209Allowance for advances to partners in Venezuela
    
    
    41
    
    
    
    
    
    
    
    Net impairment of assets
    
    
    973
    
    
    
    6
    
    
    
    398Sale of oil and gas areas
    
    
    (62
    )
    
    
    (85
    )
    
    
    Seniat claim  Venezuela
    
    
    
    
    
    
    18
    
    
    
    54Reversal of the reserve for impairment of non-current investments
    
    
    (5
    )
    
    
    (39
    )
    
    
    11Impairment of unproved oil and gas wells
    
    
    45
    
    
    
    78
    
    
    
    16Gain from the sale of equity investments
    
    
    (1,137
    )Disposal of property, plant and equipment
    
    
    17
    
    
    
    15
    
    
    
    24Income tax accrued
    
    
    494
    
    
    
    465
    
    
    
    211Income tax paid
    
    
    (167
    )
    
    
    (16
    )
    
    
    (17
    )Accrued interest
    
    
    516
    
    
    
    584
    
    
    
    552Interest paid
    
    
    (519
    )
    
    
    (491
    )
    
    
    (515
    )Edesur  Memorandum of agreement
    
    
    (85
    )
    
    
    
    
    
    
    Other
    
    
    5
    
    
    
    42
    
    
    
    (3
    )Changes in assets and liabilities:Trade receivables
    
    
    (227
    )
    
    
    150
    
    
    
    (375
    )Other receivables
    
    
    114
    
    
    
    (277
    )
    
    
    (110
    )Inventories
    
    
    (271
    )
    
    
    (136
    )
    
    
    (169
    )Other assets
    
    
    6
    
    
    
    8
    
    
    
    8Accounts payable
    
    
    52
    
    
    
    130
    
    
    
    96Payroll and social security taxes
    
    
    13
    
    
    
    110
    
    
    
    90Taxes payable
    
    
    (182
    )
    
    
    (176
    )
    
    
    (8
    )Dividends collected (Note 9.c)
    
    
    264
    
    
    
    116
    
    
    
    72Other liabilities
    
    
    26
    
    
    
    8
    
    
    
    (311
    )Net cash provided by operations
    
    
    1,853
    
    
    
    2,877
    
    
    
    1,998Cash (used in) provided by investing activities:Acquisition of property, plant and equipment and interests in
companies and oil and gas areas
    
    
    (2,124
    )
    
    
    (2,175
    )
    
    
    (1,757
    )Sale of property, plant and equipment and interests in
companies and oil and gas areas
    
    
    406
    
    
    
    124
    
    
    
    Net decrease in investments other than cash and cash equivalents
    
    
    31
    
    
    
    56
    
    
    
    62Contributions and advances to unconsolidated affiliates
    
    
    (6
    )
    
    
    (27
    )
    
    
    (1
    )Reimbursement of contributions to subsidiaries
    
    
    (4
    )
    
    
    
    
    
    
    14Net cash used in investing activities
    
    
    (1,697
    )
    
    
    (2,022
    )
    
    
    (1,682
    )Cash (used in) provided by financing activities:Net decrease in short term debt
    
    
    (179
    )
    
    
    (6
    )
    
    
    671Receipts of long-term debt
    
    
    2,095
    
    
    
    300
    
    
    
    205Receipts of long-term debt from related companies
    
    
    
    
    
    
    
    
    
    
    583Payments of long-term debt
    
    
    (2,094
    )
    
    
    (589
    )
    
    
    (2,061
    )Cash dividends paid
    
    
    (186
    )
    
    
    
    
    
    
    Net cash used in financing activities
    
    
    (364
    )
    
    
    (295
    )
    
    
    (602
    )Effect of exchange rate change on cash
    
    
    25
    
    
    
    
    
    
    
    9(Decrease) increase in cash
    
    
    (183
    )
    
    
    560
    
    
    
    (277
    )Cash and cash equivalents at the beginning of the year (a)
    
    
    1,350
    
    
    
    790
    
    
    
    1,067Cash and cash equivalents at the end of the year (a) (See Note 17.e)
    
    
    1,167
    
    
    
    1,350
    
    
    
    790
    F-17




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##### Table of Contents



PETROBRAS
ENERGÍA PARTICIPACIONES S.A.
 AND SUBSIDIARIES AND COMPANIES UNDER JOINT CONTROL
 
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(Amounts stated in millions of Argentine pesos)
 1. Business of the Company
  2. Basis of presentation
      a) Basis of consolidation
   F-18




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##### Table of Contents



b) Foreign currency translation
    
    
    Assets and liabilities stated at fair value are converted at the closing exchange rate.
 
    
    Assets and liabilities measured at historical values and the income (loss) accounts are
converted at historical exchange rates.
   
    
    Assets and liabilities are translated by using the closing exchange rate.
 
    
    Income (loss) is translated at the historical exchange rates.
   c) Consideration of inflation effects
   F-19




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##### Table of Contents



d) Accounting for the operations of oil and gas exploration and production joint ventures and
foreign branches
   e) Financial statements used
  f) Changes in professional accounting standards
   F-20




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##### Table of Contents



Gain (loss)
    
    
    Increase (decrease)Effect on Net Income for the
    
    
    Shareholders equity as ofyear ended December 31,
    
    
    December 31,2005
    
    
    2004
    
    
    2005
    
    
    2004Recoverable Value (i)
    
    
    (120
    ) (a)
    
    
    10
    (c)
    
    
    (190
    ) (e)
    
    
    (70
    ) (e)Deferred Tax (ii)
    
    
    272
    (b)
    
    
    118
    (d)
    
    
    (1,060
    ) (f)
    
    
    (1,332
    ) (g)Minority Interest (iii)
    
    
    (36
    )
    
    
    (31
    )
    
    
    303
    
    
    
    339Total effect on unappropiated
retained earnings
    
    
    116
    
    
    
    97
    
    
    
    (947
    )
    
    
    (1.063
    )Deferred loss (iii)
    
    
    
    
    
    
    
    
    
    
    (22
    )
    
    
    (49
    )Total effect on Shareholders equity
    
    
    116
    
    
    
    97
    
    
    
    (969
    )
    
    
    (1,112
    )
 
 (i)
    
    In calculating the recoverability of Property, plant and equipment and certain intangible
assets, the recoverable value is considered to be the higher of the net realizable value and
the discounted value of the expected cash flows. Before the changes in the standards, the book
value was adjusted to its recoverable value if its carrying amount exceeded the undiscounted
value in use. This first comparison has now been eliminated.(ii)
    
    The difference between the inflation-adjusted book value of Property, plant and equipment and
other non-monetary assets and their tax basis is considered to be a temporary difference that
gives rise to the recognition of a deferred liability, which  as provided by CNV General
Resolution No. 487  can either be booked or disclosed in notes to financial statements. The
Companys Management opted to book this effect.(iii)
    
    The effects of the translation of foreign operations net of the foreign-exchange differences
generated by the debt denominated in foreign currency designated as hedge of net foreign
investment abroad no longer classified between liabilities and shareholders equity, and
instead, are classified in shareholders equity.(a)
    
    An amount of 132 was booked in Other Income (Expenses), net, and (12) as lower depreciation
charge in the line Costs of sales.(b)
    
    An amount of 170 was booked in the line of Income Tax, 115 in Equity in earnings of
affiliates and (13) in Other income (expenses), net.(c)
    
    Corresponds to an amount booked as a lower depreciation charge in the line Costs of Sales.(d)
    
    An amount of 106 was booked in the line of Income Tax, 26 in Equity in earnings of affiliates
and (14) in Other income (expenses), net.(e)
    
    Corresponds to an amount booked as a lower value of Property, plant and equipment.(f)
    
    An amount of (1.217) was booked as higher Taxes payable, (100) as a lower Investment, and 257
as lower Minority interest corresponding to jointly controlled companies.(g)
    
    An amount of (1.550) was booked as higher Taxes payable, (216) as lower Investments, 159 as
higher Other receivables in Non Current Assets, and 275 as a lower Minority interest
corresponding to jointly controlled companies.    F-21




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##### Table of Contents



3. Accounting standards
     4. Valuation methods
  a) Accounts denominated in foreign currency:
   b) Inventories:
      c) Investments:
         F-22




---



##### Table of Contents



d) Trade receivables and accounts payable:
    e) Financial receivables and payables:
  f) Other receivables and payables:
  g) Property, plant and equipment:
      F-23




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##### Table of Contents



F-24




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##### Table of Contents



h) Environmental costs:
    i) Income tax, minimum presumed income tax, withholdings on export of hydrocarbons and
hydroelectric royalties:
          F-25




---



##### Table of Contents



j) Labor costs liabilities:
    k) Contingencies:
     l) Basic/diluted earnings per share:
   F-26




---



##### Table of Contents



m) Shareholders  equity accounts:
    Derivativefinancial
    
    
    Foreigninstruments
    
    
    currencymeasurement (a)
    
    
    translation (b)
    
    
    TotalBalances at 12/31/2004
    
    
    (2
    )
    
    
    (47
    )
    
    
    (49
    )Activity for the year
    
    
    2
    
    
    
    25
    
    
    
    27Balances at 12/31/2005
    
    
    
    
    
    
    (22
    )
    
    
    (22
    )Activity for the year
    
    
    
    
    
    
    1
    
    
    
    1Balances at 12/31/2006
    
    
    
    
    
    
    (21
    )
    
    
    (21
    )Activity for the year
    
    
    
    
    
    
    12
    
    
    
    12Balances at 12/31/2007
    
    
    
    
    
    
    (9
    )
    
    
    (9
    )
 (a)
    
    See Note 5(b)
    
    See Note 2.b n) Revenue recognition:
      F-27




---



##### Table of Contents



o) Changes in presentation criteria
  5. Accounting for derivative financial instruments
      6. Oil and gas areas and participation in joint ventures
       F-28




---



##### Table of Contents



Oriente
 Asset Retirement Obligations
   2007
    
    
    2006
    
    
    2005Beginning balance
    
    
    146
    
    
    
    126
    
    
    
    91Accretion
    
    
    14
    
    
    
    9
    
    
    
    8Additions
    
    
    16
    
    
    
    19
    
    
    
    Estimated cash flow changes (1)
    
    
    (3
    )
    
    
    41
    
    
    
    30Decreases
    
    
    (3
    )
    
    
    (48
    )
    
    
    Foreign currency translation / other
    
    
    
    
    
    
    (1
    )
    
    
    (3
    )Ending balance (Note 17.b)
    
    
    170
    
    
    
    146
    
    
    
    126
 (1)
    
    Principally relates to: (a) changes in the Companys expectations as to the number of wells
to be abandoned before the end of the concession period, and (b) an increase in restoration
and abandonment well costs as a consequence of general price increases in the industry.  F-29




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##### Table of Contents



Suspended well costs
  2007
    
    
    2006
    
    
    2005Beginning balance
    
    
    106
    
    
    
    61
    
    
    
    5Additions
    
    
    108
    
    
    
    123
    
    
    
    56Transferred to development
    
    
    (22
    )
    
    
    
    
    
    
    Charged to expense
    
    
    (45
    )
    
    
    (78
    )
    
    
    Ending balance
    
    
    147
    
    
    
    106
    
    
    
    61Number of wells at year end
    
    
    21
    
    
    
    26
    
    
    
    14
 Investment commitments
   Changes in oil and gas areas and participation in joint ventures in Argentina
     Recoverability of investments in Argentinas oil and gas areas
   F-30




---



##### Table of Contents



Operations in Ecuador
 Recoverability of investments
       License of Block 31
      F-31




---



##### Table of Contents



Crude Oil Transportation Agreement with Oleoductos de Crudos Pesados Ltd. (OCP)
      Agreement with Teikoku Oil Co. Ltd.
    Operations in Venezuela
   F-32




---



##### Table of Contents



F-33




---



##### Table of Contents



7. Credit risk
      8. Inventories
  2007
    
    
    2006Current
    
    
    Non-current
    
    
    Current
    
    
    Non-currentCrude oil stock
    
    
    186
    
    
    
    
    
    
    
    167
    
    
    
    Raw materials and materials
    
    
    221
    
    
    
    101
    
    
    
    161
    
    
    
    82Work in progress and finished products
    
    
    560
    
    
    
    
    
    
    
    466
    
    
    
    Advances to suppliers
    
    
    192
    
    
    
    
    
    
    
    67
    
    
    
    Other
    
    
    23
    
    
    
    
    
    
    
    28
    
    
    
    Allowance for inventories obsolescence (Note 13)
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )
    
    
    (1
    )1,182
    
    
    
    100
    
    
    
    888
    
    
    
    81
  F-34




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##### Table of Contents



9. Investments, equity in earnings of affiliates and dividends collected
   2007
    
    
    2006Book
    
    
    BookName and issuer
    
    Cost
    
    
    value
    
    
    valueCurrent:Government securities
    
    
    5
    
    
    
    5
    
    
    
    7Certificates of deposit
    
    
    757
    
    
    
    757
    
    
    
    1,038Mutual funds
    
    
    331
    
    
    
    331
    
    
    
    225Related companies (Note 18)
    
    
    
    
    
    
    
    
    
    
    Citelec S.A. (Note 9.V)
    
    
    
    
    
    
    
    
    
    
    202Yacylec S.A. (Note 9.V)
    
    
    
    
    
    
    
    
    
    
    13Hidroneuquén S.A. (Note 9.V)
    
    
    
    
    
    
    
    
    
    
    26Allowance for impairment of investments (Note 13)
    
    
    
    
    
    
    
    
    
    
    (35
    )Other
    
    
    1
    
    
    
    1
    
    
    
    31,094
    
    
    
    1,094
    
    
    
    1,479Non-current:Government securities
    
    
    1
    
    
    
    1
    
    
    
    1Loans to joint venture partners in Venezuela
    
    
    239
    
    
    
    239
    
    
    
    268Related companies (Note 18)
    
    
    143
    
    
    
    143
    
    
    
    147Equity in affiliates (Note 22.b)
    
    
    2,984
    
    
    
    3,306
    
    
    
    3,559Allowance for impairment of investments (Note 13)
    
    
    
    
    
    
    (419
    )
    
    
    (351
    )Other
    
    
    
    
    
    
    
    
    
    
    63,367
    
    
    
    3,270
    
    
    
    3,630
  F-35




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##### Table of Contents



2007
    
    
    2006
    
    
    2005Petrobras Bolivia Refinación S.A.
    
    
    31
    
    
    
    82
    
    
    
    54Coroil S.A.
    
    
    (2
    )
    
    
    
    
    
    
    Oleoducto de Crudos Pesados Ltd.
    
    
    (1
    )
    
    
    6
    
    
    
    2Inversora Mata S.A.
    
    
    (7
    )
    
    
    3
    
    
    
    (7
    )Oleoductos del Valle S.A.
    
    
    3
    
    
    
    8
    
    
    
    4Petrolera Entre Lomas S.A.
    
    
    30
    
    
    
    33
    
    
    
    27Petroquímica Cuyo S.A.I.C.
    
    
    21
    
    
    
    15
    
    
    
    7Refinería del Norte S.A.
    
    
    44
    
    
    
    32
    
    
    
    47Transportadora de Gas del Sur S.A.
    
    
    
    
    
    
    
    
    
    
    18Petroritupano S.A.
    
    
    55
    
    
    
    15
    
    
    
    Petroven-Bras S.A.
    
    
    (1
    )
    
    
    (2
    )
    
    
    Petrowayú S.A.
    
    
    2
    
    
    
    29
    
    
    
    Petrokariña S.A.
    
    
    1
    
    
    
    (3
    )
    
    
    Citelec S.A.
    
    
    
    
    
    
    
    
    
    
    136Other
    
    
    
    
    
    
    1
    
    
    
    (7
    )176
    
    
    
    219
    
    
    
    281
  2007
    
    
    2006
    
    
    2005Petrobras Bolivia Refinación S.A.
    
    
    60
    
    
    
    76
    
    
    
    1Petroquimíca Cuyo S.A.I.C.
    
    
    6
    
    
    
    5
    
    
    
    7Petrolera Entre Lomas S.A.
    
    
    19
    
    
    
    22
    
    
    
    16Oleoductos del Valle S.A.
    
    
    5
    
    
    
    7
    
    
    
    6Refinería del Norte S.A.
    
    
    19
    
    
    
    
    
    
    
    39Oleoductos de Crudos Pesados Ltd.
    
    
    6
    
    
    
    6
    
    
    
    Petroritupano S.A.
    
    
    82
    
    
    
    
    
    
    
    Petrowayú S.A.
    
    
    67
    
    
    
    
    
    
    
    Yacylec S.A.
    
    
    
    
    
    
    
    
    
    
    3264
    
    
    
    116
    
    
    
    72
 I. Investment in companies over which joint control or significant influence is exercised and
which are subject to transfer restrictions:
 a) Distrilec:
      F-36




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##### Table of Contents



b) CIESA:
 ¢
 II. Situation of the interests in public utility companies
          F-37




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##### Table of Contents



F-38




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##### Table of Contents



III. CIESAs Master Settlement Agreement and Mutual Release Agreement
        F-39




---



##### Table of Contents



IV. Petrobras Energías corporate reorganization
      V. Equity interest sales
  Hidroneuquén S.A.
   Petrobras Bolivia Refinación S.A.
     F-40




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##### Table of Contents



 Compañía Inversora en Transmisión Eléctrica S.A. (Citelec)
     Yacylec S.A.
   Petroquímica Cuyo S.A.I.C.
   Petrobras de Valores Internacional de España S.L. (PVIE)
     F-41




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##### Table of Contents



10. Financing
  2007
    
    
    2006Current
    
    
    Non-current
    
    
    Current
    
    
    Non-currentFinancial institutions
    
    
    1,071
    
    
    
    428
    
    
    
    1,186
    
    
    
    869Notes
    
    
    545
    
    
    
    4,372
    
    
    
    1,434
    
    
    
    3,079Related companies (Note 18)
    
    
    306
    
    
    
    630
    
    
    
    26
    
    
    
    7681,922
    
    
    
    5,430
    
    
    
    2,646
    
    
    
    4,716
 I. Petrobras Energías Global Program up to U$S 2.5 billion of nonconvertible notes
    
    
    Class H, for a face value of US$181.5 million maturing in May 2009, at a 9% annual rate.
    
    Class I, for a face value of US$349.2 million maturing in July 2010, at a 8.125% annual rate.
    
    Class N, for a face value of US$97 million, with principal amortized in two installments, the first  equivalent to 9.9099% of face value  settled on the same day of issuance, January 24, 2003, and the remaining due in June 2011, accruing interest at LIBOR for a period of six month plus 1%.
    
    Class Q, for a face value of US$3.81 million, with two principal amortization installments: the first equivalent to US$0.381 million settled on the same day of issuance, April 25, 2003, and the remaining in April 2008, at an interest rate of 5.625%.
    
    Class R, for a face value of US$200 million, maturing in October 2013, at a 9.375% annual rate.
    
    Class S, for a face value of U$S 300 million, maturing in May 2017, at a 5.875% annual rate. Interest is payable semiannually and principal will be repaid in a single installment at maturity. Class S notes are supported by a Standby Purchase Agreement provided by Petrobras, pursuant to which, in the event of failure to pay principal, interest and any other amount owed by Petrobras Energía in connection with Class S notes, Petrobras shall
 purchase the rights of noteholders to receive payments.
    F-42




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##### Table of Contents



II. Cross default clauses
   III. Edesur indebtedness
   
    
    Class 6 for a face value of 80, at a minimum 4% variable interest rate p.a. calculated on the basis of a reference rate published by the Central Bank of Argentina (BCRA), plus a 3% differential margin p.a. As of December 31, 2007, 20 remain outstanding under this class.
    
    Class 7 for a face value of 165, with five semiannual principal repayments of 33 as from June 2010, at an interest rate of 11.75% p.a.
     IV. CIESA and TGS indebtedness
     F-43




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##### Table of Contents



V. Detail of long-term debt
  Type
    
    Amount
    
    
    Currency
    
    
    Annual interest rateFinancial institutions144
    
    
    US$
    
    Libo+1,19
    %51
    
    
    US$
    
    
    8.75
    %(*)38
    
    
    US$
    
    Libo+0.925
    %30
    
    
    US$
    
    
    5.00
    %15
    
    
    US$
    
    Libo+1.65
    %150
    
    
    US$
    
    Libo+1
    %Related companies (Note 18)
    
    
    630
    
    
    US$
    
    
    7.22
    %NotesClass I
    
    
    1,100
    
    
    US$
    
    
    8.125
    %Class S
    
    
    945
    
    
    US$
    
    
    5.875
    %2007 Global Program (TGS)
    
    
    788
    
    
    US$
    
    
    7.875
    %Class R
    
    
    630
    
    
    US$
    
    
    9.375
    %Class H
    
    
    572
    
    
    US$
    
    
    9.00
    %Class N
    
    
    257
    
    
    US$
    
    Libo+1
    %Class 7 (Edesur)
    
    
    80
    
    
    $
    
    
    11.75
    %5,430
 (*)
    
    Average rate.  F-44




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##### Table of Contents



From 1 to 2 years
    
    
    686From 2 to 3 years
    
    
    1,261From 3 to 4 years
    
    
    375From 4 to 5 years
    
    
    81Over 5 years
    
    
    3,0275,430
 11. Fund for the investments required to increase the electric power supply in the
electric wholesale market (FONINVEMEM)
        F-45




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##### Table of Contents



12. Current and deferred income tax
  2007
    
    
    2006
    
    
    2005Income tax for the yearCurrent
    
    
    (414
    )
    
    
    (296
    )
    
    
    (148
    )Deferred
    
    
    (80
    )
    
    
    (169
    )
    
    
    (63
    )Total income tax
    
    
    (494
    )
    
    
    (465
    )
    
    
    (211
    )
 2007
    
    
    2006Deferred taxDeferred tax assetsTax loss carryfowards
    
    
    361
    
    
    
    1,304Property, plant and equipment
    
    
    266
    
    
    
    Reserve for contingencies
    
    
    95
    
    
    
    90Pension plan obligations
    
    
    19
    
    
    
    11Equity interest in affiliates
    
    
    34
    
    
    
    55Other
    
    
    134
    
    
    
    60Valuation allowance (Note 13 and 17)
    
    
    (702
    )(3)
    
    
    (1,209
    )(3)Deferred tax liabilitiesProperty, plant and equipment
    
    
    (1,073
    )
    
    
    (1,207
    )Prepaid expenses
    
    
    (6
    )
    
    
    (6
    )Equity interest in affiliates
    
    
    (322
    )
    
    
    (237
    )Other
    
    
    (26
    )
    
    
    (1
    )(1,220
    )(1)
    
    
    (1,140
    )(2)
 (1)
    
    207 are included in the non-current Other receivables line and 1,427 in
the non-current Taxes payable line.(2)
    
    311 are included in the non-current Other receivables line and 1,451 in
the non-current Taxes payable line.(3)
    
    Management evaluates the recoverability of tax loss carryforwards and the
remaining differences taking into consideration, among other elements, the projected
business profits, tax planning strategies, temporariness of future taxable income,
considering the term of expiration of the tax loss carryforwards, the future
reversions of the existing temporary differences and the recent year tax history.
All the evidence available, both positive and negative, is duly weighted and
considered in the analysis.  F-46




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##### Table of Contents



2007
    
    
    2006
    
    
    2005Income before income tax and minority
interests in subsidiaries
    
    
    1,344
    
    
    
    1,954
    
    
    
    1,228Statutory tax rate
    
    
    35
    %
    
    
    35
    %
    
    
    35
    %Income for the year at statutory tax rate
    
    
    470
    
    
    
    684
    
    
    
    430Permanent differences at income tax rate- Equity in earnings of affiliates
    
    
    233
    
    
    
    (146
    )
    
    
    (138
    )- Change in valuation allowance
    
    
    (507
    )
    
    
    (233
    )
    
    
    (61
    )- Non-deductible expenses in foreign subsidiaries
    
    
    (67
    )
    
    
    29
    
    
    
    (14
    )- Deconsolidation of companies
    
    
    (103
    )
    
    
    110
    
    
    
    - Statute of limitation of tax losses carryfoward
    
    
    449
    
    
    
    
    
    
    
    - Other
    
    
    19
    
    
    
    21
    
    
    
    (6
    )494
    
    
    
    465
    
    
    
    211
  Items
    
    2007
    
    
    2006
    
    
    2005General tax loss carryforward
    
    
    361
    
    
    
    1,304
    
    
    
    1,573Deferred losses
    
    
    
    
    
    
    
    
    
    
    85361
    
    
    
    1,304
    
    
    
    1,658
 Use up to
    
    2007
    
    
    2006
    
    
    20052007
    
    
    
    
    
    
    1,006
    
    
    
    1,6312009
    
    
    238
    
    
    
    194
    
    
    
    122010 onwards
    
    
    123
    
    
    
    104
    
    
    
    15361
    
    
    
    1,304
    
    
    
    1,658
  F-47




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##### Table of Contents



13. Contingencies, allowances and environmental matters
 Balances at
    
    
    
    
    
    
    
    
    
    
    Balancesthe beginning
    
    
    
    
    
    
    
    
    
    
    at the endAccount
    
    of the year
    
    
    Increase
    
    
    Decrease
    
    
    of the yearDeducted from assets:CurrentFor doubtful accounts
    
    
    110
    
    
    
    6
    (1)
    
    
    (2
    )
    
    
    114For other receivables (Note 17.a)
    
    
    92
    
    
    
    187
    (2)
    
    
    
    
    
    
    279For Inventories obsolescence (Note 8)
    
    
    1
    
    
    
    
    
    
    
    (1
    )(1)
    
    
    For impairment of investments (Note 9.a)
    
    
    35
    
    
    
    
    
    
    
    (35
    )(3)
    
    
    238
    
    
    
    193
    
    
    
    (38
    )
    
    
    393Non-currentFor other receivables (Note 17.a)Tax loss carryforwards
    
    
    1,154
    
    
    
    
    
    
    
    (815
    )(4)
    
    
    339Other
    
    
    55
    
    
    
    389
    (4)
    
    
    (81
    )(4)
    
    
    363For other tax credits (Note 17.a)
    
    
    46
    
    
    
    5
    (5)
    
    
    
    
    
    
    51For impairment of investments (Note 9.a)
    
    
    351
    
    
    
    68
    (6)
    
    
    
    
    
    
    419For property, plant and equipment
    
    
    355
    
    
    
    759
    (7)
    
    
    (52
    )(8)
    
    
    1,062For Inventories obsolescence (Note 8)
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    11,962
    
    
    
    1,221
    
    
    
    (948
    )
    
    
    2,2352007
    
    
    2,200
    
    
    
    1,414
    
    
    
    (986
    )
    
    
    2,6282006
    
    
    2,427
    
    
    
    55
    
    
    
    (282
    )
    
    
    2,200Included in liabilities:CurrentFor contingenciesLabor and commercial contingencies
    
    
    95
    
    
    
    79
    
    
    
    (50
    )
    
    
    12495
    
    
    
    79
    
    
    
    (50
    )
    
    
    124Non-currentFor contingenciesLabor and commercial contingencies
    
    
    85
    
    
    
    63
    
    
    
    (62
    )
    
    
    8685
    
    
    
    63
    
    
    
    (62
    )
    
    
    862007
    
    
    180
    
    
    
    142
    (9)
    
    
    (112
    )(10)
    
    
    2102006
    
    
    151
    
    
    
    29
    
    
    
    
    
    
    
    180
  (1)
    
    Recorded in Financial income (expenses) and holding gain (losses)(2)
    
    It includes 181 recorded in Other income (expenses), net and 6 in Financial income
(expenses) and holding gain (losses)(3)
    
    Effect of the sale of the equity interest in Citelec S.A. (Note 9.V)(4)
    
    The net effect was recorded in the Income tax caption(5)
    
    Recorded in Other operating expenses, net(6)
    
    Recorded in Other income (expenses), net(7)
    
    Recorded in Other income (expenses), net (Note 17.d)(8)
    
    Recorded in Cost of sales as Depreciation of property, plant and equipment(9)
    
    It includes 48 recorded in Cost of sales, 24 in Other income (expenses), net, 26 in
Financial income (expenses) and holding gain (losses) and 44 reclassified from non-current(10)
    
    It includes 68 of applications and 44 reclassified to current  F-48




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##### Table of Contents



a)Environmental matters
  b) Value-added tax on operations in Ecuador
   c) Amendment to Ecuadors Hydrocarbons Law
       F-49




---



##### Table of Contents



d) Other issues
   F-50




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##### Table of Contents



14. Contractual commitments, warranty bond, sureties and guarantees granted
   Payments due by periodLess than 1
    
    
    
    
    
    
    
    
    
    
    More than 5Total
    
    
    year
    
    

1
 3 years
    
    
    3  5 years
    
    
    years
    
    
    Until(in millions of pesos)Debt Commitments
    
    
    5,925
    
    
    
    1,443
    
    
    
    1,874
    
    
    
    399
    
    
    
    2,209
    
    
    
    2013Purchase CommitmentsShip or pay agreement with OCP (1) (2) (6)
    
    
    2,137
    
    
    
    145
    
    
    
    325
    
    
    
    367
    
    
    
    1,300
    
    
    
    2018Long-term service agreement (6)
    
    
    1,304
    
    
    
    426
    
    
    
    486
    
    
    
    166
    
    
    
    226
    
    
    
    2010Petroleum services and materials (6)
    
    
    2,054
    
    
    
    567
    
    
    
    398
    
    
    
    402
    
    
    
    687
    
    
    
    2019Ethylene (4)(6)
    
    
    1,750
    
    
    
    217
    
    
    
    425
    
    
    
    332
    
    
    
    776
    
    
    
    2015Benzene (5)(6)
    
    
    4,283
    
    
    
    494
    
    
    
    1,049
    
    
    
    830
    
    
    
    1,910
    
    
    
    2015Oil Purchase agreements for Refinery (6)
    
    
    212
    
    
    
    212
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2008Gas transportation capacity with TGS (3)
    
    
    884
    
    
    
    123
    
    
    
    246
    
    
    
    369
    
    
    
    146
    
    
    
    2014Gas purchase agreements for Genelba (6)
    
    
    41
    
    
    
    31
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    2009Pension Plan
    
    
    126
    
    
    
    13
    
    
    
    23
    
    
    
    25
    
    
    
    65Total
    
    
    18,716
    
    
    
    3,671
    
    
    
    4,836
    
    
    
    2,890
    
    
    
    7,319Sales CommitmentsNatural gas
    
    
    1,880
    
    
    
    561
    
    
    
    374
    
    
    
    325
    
    
    
    620
    
    
    
    2018Styrene
    
    
    672
    
    
    
    149
    
    
    
    393
    
    
    
    130
    
    
    
    
    
    
    
    2009Electric power
    
    
    257
    
    
    
    150
    
    
    
    104
    
    
    
    3
    
    
    
    
    
    
    
    2011LPG
    
    
    175
    
    
    
    142
    
    
    
    22
    
    
    
    11
    
    
    
    
    
    
    
    2007Oil sale agreement
    
    
    2,390
    
    
    
    1,654
    
    
    
    736
    
    
    
    
    
    
    
    
    
    
    
    2009Total
    
    
    5,374
    
    
    
    2,656
    
    
    
    1,629
    
    
    
    469
    
    
    
    620
 (1)
    
    Net of transportation capacity sold to third parties.(2)
    
    Estimated average price US$2.30 per barrel.(3)
    
    Estimated price P$7.9 million per millon of cubic meters.(4)
    
    Estimated average price US$806 per ton. Contractual prices are ind US Dollars. Peso amounts
translated using exchange rate as of December 31, 2007.(5)
    
    Estimated price US$709 per ton. Contractual prices are in US Dollars. Peso amounts translated
using exchange rate as of December 31, 2007.(6)
    
    Prices are generally
determined by formulas based on future market prices. Estimated prices used
to calculate the monetary equivalent of these purchase obligations for purposes of the table are
based on current market prices as of December 31, 2007 and may not reflect actual future prices of these
commodities. Accordingly, the peso amounts provided in this table with respect to these
obligations are provided for illustrative purpose only.  Obligations
 by periodLess than 1
    
    
    
    
    
    
    
    
    
    
    More than 5Total
    
    
    year
    
    

1
 3 years
    
    

3
 5 years
    
    
    yearsPurchase CommitmentsShip or pay agreement with OCP (in millions of barrels)
    
    
    295
    
    
    
    20
    
    
    
    47
    
    
    
    53
    
    
    
    175Ethylene (in thousands of tons)
    
    
    689
    
    
    
    55
    
    
    
    131
    
    
    
    144
    
    
    
    359Benzene (in thousands of tons)
    
    
    1,919
    
    
    
    154
    
    
    
    365
    
    
    
    400
    
    
    
    1,000Oil Purchase agreements for Refinery (in millions of barrels)
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    Gas transportation capacity with TGS (in millions of cubic meters)
    
    
    7,869
    
    
    
    1,095
    
    
    
    2,190
    
    
    
    3,285
    
    
    
    1,299Gas purchase agreements for Genelba (in millions of cubic meters)
    
    
    262
    
    
    
    197
    
    
    
    65
    
    
    
    
    
    
    
    Sales CommitmentsNatural gas (in millions of cubic meters)
    
    
    10,196
    
    
    
    2,699
    
    
    
    1,869
    
    
    
    1,774
    
    
    
    3,854Styrene (in thousands of tons)
    
    
    150
    
    
    
    35
    
    
    
    85
    
    
    
    30
    
    
    
    Electric power (in MWh)
    
    
    2,337
    
    
    
    1,390
    
    
    
    928
    
    
    
    19
    
    
    
    LPG (in thousands of tons)
    
    
    235
    
    
    
    130
    
    
    
    70
    
    
    
    35
    
    
    
    Oil sale agreement (in millions of barrels)
    
    
    10
    
    
    
    7
    
    
    
    3
    
    
    
    
    
    
    
    
  F-51




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##### Table of Contents



15. Petrobras Energías social benefits and other payroll benefits
 a. Defined contribution plan
 Supplementary Pension Plan
 Administradora de Fondos de Jubilaciones y Pensiones
  b. Defined benefit plan
 Indemnity Plan
  Compensatory Fund
      2007
    
    
    2006
    
    
    2005Plan assets
    
    
    31
    
    
    
    35
    
    
    
    40Projected benefit obligations
    
    
    (176
    )
    
    
    (161
    )
    
    
    (99
    )Net position
    
    
    (145
    )
    
    
    (126
    )
    
    
    (59
    )Unrecognized prior service cost
    
    
    38
    
    
    
    41
    
    
    
    5Unrecognized actuarial loss
    
    
    52
    
    
    
    53
    
    
    
    41Net liability recognized
    
    
    (55
    )
    
    
    (32
    )
    
    
    (13
    )
  F-52




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##### Table of Contents



c. Stock option plan
   2001 Plan
 i.
    
    5,364,125 options to receive the value arising from the positive difference between the
average listed price of Petrobras Participaciones shares on the New York Stock Exchange
during the 20 days prior to exercising the option and 1.64 Argentine pesos per share, for
the same number of shares (appreciation rights).ii.
    
    596,014 options to receive the same number of shares at no cost for the beneficiary.
These options may be exercised as from March 5, 2005 (full value).
  2000 Plan
 i.
    
    3,171,137 options to receive the value arising from the positive difference between the
average listed price of Petrobras Participaciones shares on the New York Stock Exchange
during the 20 days prior to exercising the option and 1.48 Argentine pesos per share, for
such number of shares (appreciation rights).ii.
    
    352,347 options to receive the same number of shares at no cost to the beneficiary.
These options may be exercised as from May 29, 2004 (full value).
   2007
    
    
    2006
    
    
    2005Weighted -
    
    
    
    
    
    
    Weighted -
    
    
    
    
    
    
    Weighted -Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageOptions
    
    
    Exercise Price
    
    
    Options
    
    
    Exercise Price
    
    
    Options
    
    
    Exercise PriceOutstanding at the beginning of the year
    
    
    654,697
    
    
    
    1.59
    
    
    
    1,198,803
    
    
    
    1.59
    
    
    
    3,195,192
    
    
    
    1.60Exercised
    
    
    (427,339
    )
    
    
    1.64
    
    
    
    (237,255
    )
    
    
    1.60
    
    
    
    (1,996,389
    )
    
    
    1.60Prescripted
    
    
    (227,358
    )
    
    
    
    
    
    
    (306,851
    )
    
    
    
    
    
    
    Outstanding at the end of the year
    
    
    
    
    
    
    
    
    
    
    654,697
    
    
    
    1.59
    
    
    
    1,198,803
    
    
    
    1.59Exercisable at the end of the year
    
    
    
    
    
    
    
    
    
    
    654,697
    
    
    
    1.59
    
    
    
    1,198,803
    
    
    
    1.59
  F-53




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##### Table of Contents



16. Capital stock and restrictions on unappropriated retained earnings
  December 31,2007
    
    
    2006
    
    
    2005Class B:1 vote and face value of $1 per share
    
    
    2,132
    
    
    
    2,132
    
    
    
    2,132
    17. Other receivables, other liabilities, other operating expenses net, other income
(expenses), net and supplemental cash flow information
 2007
    
    
    2006Current
    
    
    Non-current
    
    
    Current
    
    
    Non-currenta
    )

    
    
    Other receivablesJoint ventures
    
    
    33
    
    
    
    
    
    
    
    26
    
    
    
    Related companies (Note 18)
    
    
    1,621
    
    
    
    5
    
    
    
    117
    
    
    
    5Tax credits
    
    
    482
    
    
    
    447
    
    
    
    440
    
    
    
    374Deferred tax assets
    
    
    
    
    
    
    909
    
    
    
    
    
    
    
    1,520Advisory services to other companies
    
    
    3
    
    
    
    
    
    
    
    1
    
    
    
    Receivables from the sale of companies (Note 9.V)
    
    
    133
    
    
    
    
    
    
    
    
    
    
    
    Expense refunds
    
    
    65
    
    
    
    7
    
    
    
    201
    
    
    
    Prepaid expenses
    
    
    69
    
    
    
    25
    
    
    
    69
    
    
    
    24Credit for new projects in the mixed companies in Venezuela (Note 6)
    
    
    279
    
    
    
    
    
    
    
    272
    
    
    
    Guarantee deposits
    
    
    7
    
    
    
    
    
    
    
    5
    
    
    
    Commercial agreements
    
    
    
    
    
    
    
    
    
    
    69
    
    
    
    Allowance for other receivables and tax credits (Note 13)
    
    
    (279
    )
    
    
    (753
    )
    
    
    (92
    )
    
    
    (1,255
    )Other
    
    
    60
    
    
    
    17
    
    
    
    74
    
    
    
    232,473
    
    
    
    657
    
    
    
    1,182
    
    
    
    691
  F-54




---



##### Table of Contents



2007
    
    
    2006Current
    
    
    Non-current
    
    
    Current
    
    
    Non-currentb
    )
    

    
    Other liabilitiesRelated companies (Note 18)
    
    
    15
    
    
    
    
    
    
    
    27
    
    
    
    Advanced collections
    
    
    64
    
    
    
    55
    
    
    
    68
    
    
    
    58Accrual for expenses- Environmental remediation
    
    
    38
    
    
    
    64
    
    
    
    55
    
    
    
    64- Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50Joint ventures
    
    
    35
    
    
    
    
    
    
    
    
    
    
    
    Innova preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15Litigation and fines accrual
    
    
    101
    
    
    
    
    
    
    
    26
    
    
    
    22Third party collection
    
    
    12
    
    
    
    
    
    
    
    1
    
    
    
    Asset retirement obligation (Note 6)
    
    
    
    
    
    
    170
    
    
    
    
    
    
    
    146Debt for the acquisition of companies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Derivatives
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unified Fund  Basic Price of Electric Power (1)
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    2Other
    
    
    39
    
    
    
    17
    
    
    
    36
    
    
    
    9305
    
    
    
    307
    
    
    
    214
    
    
    
    366
 (1)
    
    To ensure the completion of works in Pichi Picún Leufú Hydroelectrical Complex within the
term of the concession and a profitability to make the investment viable, the Energy
Department granted the Company the amount of 25. For the purpose of determining whether or
not this amount should be repaid, a support price system was implemented for the electric
power to be generated by the Complex and sold on the Wholesale Electric Power Market. This
support price system will be applied over a ten-year term, which will be divided into two
consecutive five-year periods, as from December 1999. In order to implement this system, an
Annual Monomial Support Price (AMSP) was set in the amounts of US$/Kwh 0.021 and US$/Kwh
0.023 for the first and second period, respectively. In order to determine the amount to be
reimbursed, each year of the above mentioned term, the difference between the Annual Average
Monomial Price of the Complex bars generation, and the aforesaid AMSP, valued in terms of the
electric power generated by the Complex during that year will be determined. Owing to the
selling prices set for the energy generated by the Complex, and the future prices estimated,
considering that it implies profitability reinsurance, as of December 31, 2007 the Company
accrued a profit of 23. 2007
    
    
    2006
    
    
    2005c
    )
    

    
    Other operating expenses, netAdvisory services to other companies
    
    
    46
    
    
    
    48
    
    
    
    37Environmental remediation expenses
    
    
    (17
    )
    
    
    (5
    )
    
    
    (29
    )Taxes on bank transactions
    
    
    (121
    )
    
    
    (98
    )
    
    
    (90
    )Contingencies
    
    
    (24
    )
    
    
    (24
    )
    
    
    (3
    )Oil transportation agreement with OCP
    
    
    (155
    )
    
    
    (178
    )
    
    
    (184
    )Fundopem (2)
    
    
    70
    
    
    
    46
    
    
    
    42Edesur  Memorandum of agreement (Note 9.II)
    
    
    85
    
    
    
    
    
    
    
    Commercial claims resolution
    
    
    
    
    
    
    75
    
    
    
    Amendment to Ecuadors Hydrocarbons Law
    
    
    (44
    )
    
    
    
    
    
    
    Tax Credit allowance
    
    
    (15
    )
    
    
    (1
    )
    
    
    (78
    )Other
    
    
    (2
    )
    
    
    2
    
    
    
    (24
    )(177
    )
    
    
    (135
    )
    
    
    (329
    )
 (2)
    
    Tax benefits earned by Innova S.A. consisting in a partial reduction of certain taxes
in accordance with an incentive program that the Brazilian state of Rio Grande do Sul
provides to companies located there.  F-55




---



##### Table of Contents



2007
    
    
    2006
    
    
    2005d
    )

    
    
    Other income (expenses), netGain from the sale of Hidroneuquén S.A. (Note 9.V)
    
    
    23
    
    
    
    
    
    
    
    Gain from the sale of Petrobras de Valores Internacional de España S.L. (Note 9.V)
    
    
    1,014
    
    
    
    
    
    
    
    Gain from the sale of Yacylec S.A. (Note 9.V)
    
    
    16
    
    
    
    
    
    
    
    Gain from the sale of Petroquímica Cuyo S.A.I.C. (Note 9.V)
    
    
    40
    
    
    
    
    
    
    
    Gain from the sale of Petrobras Bolivia Refinación S.A. (Note 9.V)
    
    
    44
    
    
    
    
    
    
    
    Allowance for advances to partners in Venezuela
    
    
    (41
    )
    
    
    
    
    
    
    Disposals of property, plant and equipment
    
    
    (17
    )
    
    
    (15
    )
    
    
    (24
    )Seniat claim  Venezuela
    
    
    
    
    
    
    (18
    )
    
    
    (54
    )Sales of oil and gas areas (Note 6)
    
    
    62
    
    
    
    85
    
    
    
    Net impairment of assets in Ecuador (Note 6)
    
    
    (759
    )
    
    
    
    
    
    
    Net impairment of assets in Venezuela (Note 6)
    
    
    (214
    )
    
    
    (6
    )
    
    
    (310
    )Net impairment of assets in Argentina (Note 6)
    
    
    
    
    
    
    
    
    
    
    (88
    )Financial debt setled in advance
    
    
    
    
    
    
    
    
    
    
    (9
    )Sales price adjustment  Conuar S.A.
    
    
    
    
    
    
    
    
    
    
    23Reversal of the allowance for impairment of investments  Hidroneuquén S.A.
    
    
    
    
    
    
    10
    
    
    
    Reversal of the allowance for impairment of investments  Enecor S.A.
    
    
    5
    
    
    
    6
    
    
    
    (11
    )Reversal of the allowance for impairment of investments  Citelec S.A.
    
    
    
    
    
    
    23
    
    
    
    Other, net
    
    
    (43
    )
    
    
    8
    
    
    
    14130
    
    
    
    93
    
    
    
    (459
    )
 2007
    
    
    2006
    
    
    2005e
    )
    Supplemental cash flow informationCash
    
    
    98
    
    
    
    86
    
    
    
    104Time deposits and mutual funds
    
    
    1,069
    
    
    
    1,264
    
    
    
    686Cash and cash equivalent at the end of the year
    
    
    1,167
    
    
    
    1,350
    
    
    
    790
 18. Balances and transactions with related companies
       F-56




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##### Table of Contents



2007Current
    
    
    Non-currentTrade
    
    
    Other
    
    
    Accounts
    
    
    Other
    
    
    
    
    
    
    OtherCompany
    
    Receivables
    
    
    Receivables
    
    
    Payable
    
    
    Liabilities
    
    
    Loans
    
    
    receivables
    
    
    Investments
    
    
    LoansOleoducto de Crudos Pesados Ltd.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    133
    
    
    
    Transportadora de Gas del Sur S.A.
    
    
    4
    
    
    
    4
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Refinería del Norte S.A.
    
    
    9
    
    
    
    5
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Petrobras International Finance Co.
    
    
    85
    
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Petróleo Brasileiro S.A.  Petrobras
    
    
    3
    
    
    
    2
    
    
    
    59
    
    
    
    11
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    Petrolera Entre Lomas S.A.
    
    
    
    
    
    
    
    
    
    
    71
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Propyme SGR
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    Petrobras Internacional  Braspetro B.V.
    
    
    
    
    
    
    1,492
    
    
    
    
    
    
    
    
    
    
    
    178
    
    
    
    
    
    
    
    
    
    
    
    630Compañía Mega S.A.
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Petrobras Transporte S.A.  Transpetro
    
    
    
    
    
    
    
    
    
    
    79
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Petrobras de Valores Internacional de España S.L. (1)
    
    
    
    
    
    
    96
    
    
    
    
    
    
    
    
    
    
    
    128
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    5
    
    
    
    10
    
    
    
    3
    
    
    
    4
    
    
    
    
    
    
    
    2
    
    
    
    4
    
    
    
    Total
    
    
    106
    
    
    
    1,621
    
    
    
    255
    
    
    
    15
    
    
    
    306
    
    
    
    5
    
    
    
    143
    
    
    
    630
 (1)
    
    Corresponds to the balance generated by proportional consolidation of Petrobras de Valores
International de España S.L. (Note 9.V)  F-57




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##### Table of Contents



2006Current
    
    
    Non-currentTrade
    
    
    Other
    
    
    Accounts
    
    
    Other
    
    
    
    
    
    
    OtherCompany
    
    Receivables
    
    
    Receivables
    
    
    Payable
    
    
    Liabilities
    
    
    Loans
    
    
    receivables
    
    
    Investments
    
    
    LoansPetroquímica Cuyo S.A.
    
    
    11
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    Oleoducto de Crudos Pesados Ltd.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    138
    
    
    
    Petrobras Bolivia Refinación S.A.
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Transportadora de Gas del Sur S.A.
    
    
    10
    
    
    
    12
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Refinería del Norte S.A.
    
    
    3
    
    
    
    8
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Petrobras International Finance Co.
    
    
    57
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Petróleo Brasileiro S.A.  Petrobras
    
    
    4
    
    
    
    5
    
    
    
    33
    
    
    
    11
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    Petrolera Entre Lomas S.A.
    
    
    
    
    
    
    
    
    
    
    71
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Propyme SGR
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    Petrobras Internacional  Braspetro B.V.
    
    
    
    
    
    
    76
    
    
    
    2
    
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    768Other
    
    
    1
    
    
    
    14
    
    
    
    5
    
    
    
    16
    
    
    
    
    
    
    
    2
    
    
    
    3
    
    
    
    Total
    
    
    92
    
    
    
    117
    
    
    
    136
    
    
    
    27
    
    
    
    26
    
    
    
    5
    
    
    
    147
    
    
    
    768
  2007
    
    
    2006
    
    
    2005Company
    
    Purchases
    
    
    Sales
    
    
    Purchases
    
    
    Sales
    
    
    Purchases
    
    
    SalesOleoductos del Valle S.A.
    
    
    21
    
    
    
    
    
    
    
    23
    
    
    
    
    
    
    
    15
    
    
    
    Transportadora de Gas del Sur S.A.
    
    
    108
    
    
    
    35
    
    
    
    40
    
    
    
    34
    
    
    
    30
    
    
    
    Refinería del Norte S.A.
    
    
    108
    
    
    
    37
    
    
    
    142
    
    
    
    102
    
    
    
    122
    
    
    
    82Petrobras International Finance Co.
    
    
    426
    
    
    
    1,942
    
    
    
    101
    
    
    
    1,428
    
    
    
    118
    
    
    
    977Petroquímica Cuyo S.A.I.C.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33
    
    
    
    
    
    
    
    Petrolera Entre Lomas S.A.
    
    
    454
    
    
    
    1
    
    
    
    440
    
    
    
    1
    
    
    
    344
    
    
    
    1Petróleo Brasileiro S.A.  Petrobras
    
    
    95
    
    
    
    17
    
    
    
    102
    
    
    
    14
    
    
    
    
    
    
    
    10Petrobras Bolivia Refinación.S.A.
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    33
    
    
    
    3
    
    
    
    34Copesul
    
    
    1,247
    
    
    
    
    
    
    
    1,032
    
    
    
    
    
    
    
    918
    
    
    
    Petrobras Paraguay Refinación Ltd.
    
    
    
    
    
    
    95
    
    
    
    
    
    
    
    42
    
    
    
    
    
    
    
    Petrobras Transporte S.A.  Transpetro
    
    
    79
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    2,538
    
    
    
    2,137
    
    
    
    1,880
    
    
    
    1,687
    
    
    
    1,550
    
    
    
    1,104
 19. Business segment and geographic consolidated information
  a)
    
    Oil and Gas Exploration and Production, composed of the Companys participation in oil
and gas blocks and its interests in Oleoductos del Valle S.A. and Oleoducto de Crudos
Pesados Ltd.b)
    
    Refining and Distribution,
including the Companys operations in Refinería San Lorenzo
and Bahía Blanca, its own gas station network and the
Companys equity interests in
Refinería del Norte S.A. and Petrobras Bolivia Refinación S.A. (Note 9.V).c)
    
    Petrochemicals, comprising the Companys own fertilizer and styrenics operations
developed in Argentina and Brazil plants and its equity interest in Petroquímica Cuyo
S.A.I.C. (Note 9.V).d)
    
    Gas and Energy comprises operations in Marketing and Transportation of Gas and
Electricity. The Marketing and Transportation of Gas operations include the sale of gas and
the liquefied petroleum gas brokerage and trading, and its interest in Transportadora de
Gas del Sur S.A. The Electricity operations include Companys operations in the Genelba
plant and in the Pichi Picún Leufú Hydroelectric Complex, and its interest in Edesur S.A.,
Transener S.A., Enecor S.A. and Yacylec S.A. (Note 9.V).
  F-58




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##### Table of Contents



2007Oil and Gas
    
    
    
    
    
    
    
    
    
    
    Gas and EnergyExploration
    
    
    Refining
    
    
    
    
    
    
    Marketing and
    
    
    
    
    
    
    Corporateand
    
    
    and
    
    
    
    
    
    
    Transportation
    
    
    
    
    
    
    andProduction
    
    
    Distribution
    
    
    Petrochemicals
    
    
    of Gas
    
    
    Electricity
    
    
    Eliminations
    
    
    TotalTotal assets
    
    
    8,354
    
    
    
    2,937
    
    
    
    2,059
    
    
    
    2,746
    
    
    
    2,568
    
    
    
    2,693
    
    
    
    21,357Total liabilities
    
    
    2,283
    
    
    
    1,060
    
    
    
    803
    
    
    
    2,030
    
    
    
    775
    
    
    
    5,159
    
    
    
    12,110
 2006Oil and Gas
    
    
    
    
    
    
    
    
    
    
    Gas and EnergyExploration
    
    
    Refining
    
    
    
    
    
    
    Marketing and
    
    
    
    
    
    
    Corporateand
    
    
    and
    
    
    
    
    
    
    Transportation
    
    
    
    
    
    
    andProduction
    
    
    Distribution
    
    
    Petrochemicals
    
    
    of Gas
    
    
    Electricity
    
    
    Eliminations
    
    
    TotalTotal assets
    
    
    9,752
    
    
    
    2,552
    
    
    
    1,729
    
    
    
    2,832
    
    
    
    2,292
    
    
    
    1,322
    
    
    
    20,479Total liabilities
    
    
    2,966
    
    
    
    814
    
    
    
    609
    
    
    
    2,191
    
    
    
    720
    
    
    
    4,609
    
    
    
    11,909
 2007Oil and Gas
    
    
    
    
    
    
    
    
    
    
    Gas and EnergyExploration
    
    
    
    
    
    
    
    
    
    
    Marketing and
    
    
    
    
    
    
    Corporateand
    
    
    Refining
    
    
    
    
    
    
    Transportation
    
    
    
    
    
    
    andProduction
    
    
    and Distribution
    
    
    Petrochemicals
    
    
    of Gas
    
    
    Electricity
    
    
    Eliminations
    
    
    TotalConsolidated Statement of
IncomeNet salesTo third parties
    
    
    3,005
    
    
    
    5,606
    
    
    
    3,034
    
    
    
    1,188
    
    
    
    1,400
    
    
    
    (775
    )
    
    
    13,458Inter-segment
    
    
    1,619
    
    
    
    220
    
    
    
    29
    
    
    
    213
    
    
    
    25
    
    
    
    (2,106
    )
    
    
    4,624
    
    
    
    5,826
    
    
    
    3,063
    
    
    
    1,401
    
    
    
    1,425
    
    
    
    (2,881
    )
    
    
    13,458Cost of sales
    
    
    (2,482
    )
    
    
    (5,744
    )
    
    
    (2,676
    )
    
    
    (1,081
    )
    
    
    (1,020
    )
    
    
    2,871
    
    
    
    (10,132
    )Gross profit (loss)
    
    
    2,142
    
    
    
    82
    
    
    
    387
    
    
    
    320
    
    
    
    405
    
    
    
    (10
    )
    
    
    3,326Administrative and selling
expenses
    
    
    (284
    )
    
    
    (374
    )
    
    
    (351
    )
    
    
    (47
    )
    
    
    (143
    )
    
    
    (245
    )
    
    
    (1,444
    )Exploration expenses
    
    
    (172
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (172
    )Other operating (expenses)
income, net
    
    
    (206
    )
    
    
    (22
    )
    
    
    56
    
    
    
    37
    
    
    
    81
    
    
    
    (123
    )
    
    
    (177
    )Operating income (loss)
    
    
    1,480
    
    
    
    (314
    )
    
    
    92
    
    
    
    310
    
    
    
    343
    
    
    
    (378
    )
    
    
    1,533Equity earnings of affiliates
    
    
    80
    
    
    
    75
    
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    176Other
    
    
    (640
    )
    
    
    96
    
    
    
    62
    
    
    
    (261
    )
    
    
    (146
    )
    
    
    (247
    )
    
    
    (1,136
    )Net income (loss)
    
    
    920
    
    
    
    (143
    )
    
    
    175
    
    
    
    49
    
    
    
    197
    
    
    
    (625
    )
    
    
    573
  F-59




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##### Table of Contents



2006Oil and Gas
    
    
    
    
    
    
    
    
    
    
    Gas and EnergyExploration
    
    
    
    
    
    
    
    
    
    
    Marketing and
    
    
    
    
    
    
    Corporateand
    
    
    Refining
    
    
    
    
    
    
    Transportation
    
    
    
    
    
    
    andProduction
    
    
    and Distribution
    
    
    Petrochemicals
    
    
    of Gas
    
    
    Electricity
    
    
    Eliminations
    
    
    TotalConsolidated Statement of
IncomeNet salesTo third parties
    
    
    2,653
    
    
    
    4,262
    
    
    
    2,447
    
    
    
    1,202
    
    
    
    1,181
    
    
    
    
    
    
    
    11,745Inter-segment
    
    
    2,128
    
    
    
    269
    
    
    
    43
    
    
    
    184
    
    
    
    26
    
    
    
    (2,650
    )
    
    
    4,781
    
    
    
    4,531
    
    
    
    2,490
    
    
    
    1,386
    
    
    
    1,207
    
    
    
    (2,650
    )
    
    
    11,745Cost of sales
    
    
    (2,094
    )
    
    
    (4,692
    )
    
    
    (2,068
    )
    
    
    (1,034
    )
    
    
    (859
    )
    
    
    2,679
    
    
    
    (8,068
    )Gross profit (loss)
    
    
    2,687
    
    
    
    (161
    )
    
    
    422
    
    
    
    352
    
    
    
    348
    
    
    
    29
    
    
    
    3,677Administrative and selling
expenses
    
    
    (313
    )
    
    
    (313
    )
    
    
    (292
    )
    
    
    (44
    )
    
    
    (120
    )
    
    
    (195
    )
    
    
    (1,277
    )Exploration expenses
    
    
    (117
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (117
    )Other operating (expenses)
income, net
    
    
    (78
    )
    
    
    6
    
    
    
    32
    
    
    
    37
    
    
    
    (36
    )
    
    
    (96
    )
    
    
    (135
    )Operating income (loss)
    
    
    2,179
    
    
    
    (468
    )
    
    
    162
    
    
    
    345
    
    
    
    192
    
    
    
    (262
    )
    
    
    2,148Equity earnings of affiliates
    
    
    89
    
    
    
    114
    
    
    
    15
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    219Other
    
    
    (860
    )
    
    
    97
    
    
    
    (49
    )
    
    
    (252
    )
    
    
    (46
    )
    
    
    (193
    )
    
    
    (1,303
    )Net income (loss)
    
    
    1,408
    
    
    
    (257
    )
    
    
    128
    
    
    
    93
    
    
    
    147
    
    
    
    (455
    )
    
    
    1,064
 2005Oil and Gas
    
    
    
    
    
    
    
    
    
    
    Gas and EnergyExploration
    
    
    
    
    
    
    
    
    
    
    Marketing and
    
    
    
    
    
    
    Corporateand
    
    
    Refining
    
    
    
    
    
    
    Transportation
    
    
    
    
    
    
    andProduction
    
    
    and Distribution
    
    
    Petrochemical
    
    
    of Gas
    
    
    Electricity
    
    
    Eliminations
    
    
    TotalStatement of incomeNet salesTo third parties
    
    
    2,935
    
    
    
    3,572
    
    
    
    2,140
    
    
    
    1,009
    
    
    
    999
    
    
    
    
    
    
    
    10,655Inter-segment
    
    
    1,722
    
    
    
    284
    
    
    
    38
    
    
    
    110
    
    
    
    18
    
    
    
    (2,172
    )
    
    
    4,657
    
    
    
    3,856
    
    
    
    2,178
    
    
    
    1,119
    
    
    
    1,017
    
    
    
    (2,172
    )
    
    
    10,655Cost of sales
    
    
    (1,966
    )
    
    
    (3,726
    )
    
    
    (1,702
    )
    
    
    (834
    )
    
    
    (755
    )
    
    
    2,132
    
    
    
    (6,851
    )Gross profit (loss)
    
    
    2,691
    
    
    
    130
    
    
    
    476
    
    
    
    285
    
    
    
    262
    
    
    
    (40
    )
    
    
    3,804Administrative and selling
expenses
    
    
    (304
    )
    
    
    (274
    )
    
    
    (242
    )
    
    
    (37
    )
    
    
    (88
    )
    
    
    (191
    )
    
    
    (1,136
    )Exploration expenses
    
    
    (34
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34
    )Other operating (expenses)
income, net
    
    
    (314
    )
    
    
    (5
    )
    
    
    33
    
    
    
    32
    
    
    
    (4
    )
    
    
    (71
    )
    
    
    (329
    )Operating income (loss)
    
    
    2,039
    
    
    
    (149
    )
    
    
    267
    
    
    
    280
    
    
    
    170
    
    
    
    (302
    )
    
    
    2,305Equity earnings of affiliates
    
    
    15
    
    
    
    101
    
    
    
    7
    
    
    
    18
    
    
    
    140
    
    
    
    
    
    
    
    281Other
    
    
    (1,551
    )
    
    
    77
    
    
    
    (87
    )
    
    
    (235
    )
    
    
    (78
    )
    
    
    17
    
    
    
    (1,857
    )Net income (loss)
    
    
    503
    
    
    
    29
    
    
    
    187
    
    
    
    63
    
    
    
    232
    
    
    
    (285
    )
    
    
    729
  F-60




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##### Table of Contents



2007Argentina
    
    
    Venezuela
    
    
    Bolivia
    
    
    Peru
    
    
    Brazil
    
    
    Ecuador
    
    
    Other
    
    
    Eliminations
    
    
    TotalLong lived assets
    
    
    10,400
    
    
    
    2,624
    
    
    
    251
    
    
    
    764
    
    
    
    511
    
    
    
    120
    
    
    
    10
    
    
    
    
    
    
    
    14,680Rest of assets
    
    
    5,073
    
    
    
    118
    
    
    
    
    
    
    
    88
    
    
    
    468
    
    
    
    318
    
    
    
    612
    
    
    
    
    
    
    
    6,677Total assets
    
    
    15,473
    
    
    
    2,742
    
    
    
    251
    
    
    
    852
    
    
    
    979
    
    
    
    438
    
    
    
    622
    
    
    
    
    
    
    
    21,357Net sales
    
    
    10,063
    
    
    
    
    
    
    
    127
    
    
    
    1,101
    
    
    
    1,457
    
    
    
    873
    
    
    
    25
    
    
    
    (188
    )
    
    
    13,458Operating income
(expenses)
    
    
    778
    
    
    
    (8
    )
    
    
    31
    
    
    
    500
    
    
    
    67
    
    
    
    166
    
    
    
    (1
    )
    
    
    
    
    
    
    1,533
 2006Argentina
    
    
    Venezuela
    
    
    Bolivia
    
    
    Peru
    
    
    Brazil
    
    
    Ecuador
    
    
    Other
    
    
    Eliminations
    
    
    TotalLong lived assets
    
    
    10,039
    
    
    
    2,766
    
    
    
    432
    
    
    
    984
    
    
    
    388
    
    
    
    777
    
    
    
    1
    
    
    
    
    
    
    
    15,387Rest of assets
    
    
    3,508
    
    
    
    506
    
    
    
    
    
    
    
    92
    
    
    
    287
    
    
    
    268
    
    
    
    431
    
    
    
    
    
    
    
    5,092Total assets
    
    
    13,547
    
    
    
    3,272
    
    
    
    432
    
    
    
    1,076
    
    
    
    675
    
    
    
    1,045
    
    
    
    432
    
    
    
    
    
    
    
    20,479Net sales
    
    
    8,751
    
    
    
    312
    
    
    
    207
    
    
    
    902
    
    
    
    1,215
    
    
    
    652
    
    
    
    14
    
    
    
    (308
    )
    
    
    11,745Operating income
(expenses)
    
    
    1,130
    
    
    
    186
    
    
    
    45
    
    
    
    446
    
    
    
    54
    
    
    
    287
    
    
    
    1
    
    
    
    (1
    )
    
    
    2,148
 2005Argentina
    
    
    Venezuela
    
    
    Bolivia
    
    
    Peru
    
    
    Brazil
    
    
    Ecuador
    
    
    Other
    
    
    Eliminations
    
    
    TotalNet sales
    
    
    7,378
    
    
    
    1,175
    
    
    
    136
    
    
    
    705
    
    
    
    972
    
    
    
    449
    
    
    
    12
    
    
    
    (172
    )
    
    
    10,655Operating income
(expenses)
    
    
    1,157
    
    
    
    639
    
    
    
    18
    
    
    
    385
    
    
    
    48
    
    
    
    66
    
    
    
    (8
    )
    
    
    
    
    
    
    2,305
 20. Controlling Group
   21. Summary of significant differences between accounting principles followed by the
Company and US GAAP, and summary of new US GAAP accounting pronouncements not yet adopted.
  A  Explanation of the main differences included in the reconciliation from Argentina GAAP to US
GAAP, corresponding to Petrobras Energía Participaciones and its subsidiaries
 1) Deferred charges
    F-61




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2) Debt refinancing costs
   3) Pension plan obligations
     4) Foreign currency translation
    5) Discounting of certain receivables and liabilities
    F-62




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6) Guarantors accounting for guarantees
   7) Accounting for inventories
  8) Accounting for business combinations
     Purchase Price Allocation
    
    2007
    
    
    2006Property, plant and equipment
    
    
    163
    
    
    
    194Equity in affiliates
    
    
    (8
    )
    
    
    7Goodwill (1)
    
    
    101
    
    
    
    112Deferred Income Taxes
    
    
    (54
    )
    
    
    (70
    )Residual value at year end
    
    
    202
    
    
    
    243
 (1)
    
    Correspond 101 to the Petrochemical business segment as of December 31, 2007 and 101 to
the Petrochemical business segment and 11 to the Refining business segment as of December 31,
2006. The amount of Goodwill assigned to the Refining business segment was reversed in 2007 as a
result of the sale of companies described in Note 9.V.   F-63




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##### Table of Contents



9) Impairment of goodwill, property, plant and equipment, and equity in affiliates
 a)
    
    As described above in 8.a), the purchase price of Petrobras Energía has been allocated
under US GAAP (but not under Argentina GAAP) to the identifiable assets acquired and
liabilities assumed, based upon their fair values as of acquisition date, being the excess
reflected as goodwill.Impairment of goodwill, property, plant and equipment recorded under US GAAP in the year
ended December 31, 2006:The company performs the impairment test of the goodwill, following the method established
under SFAS 142. In year ended December 31, 2006, under US GAAP, the Company recorded an
impairment charge of 70 (before the effect of income taxes) to write off the allocated
purchase price of goodwill, and equity in affiliates (43 and 27, respectively) originated in
the business combination described in 8.a) above.The impairment of goodwill in the US GAAP Summarized Consolidated data in Note 22 was
allocated to the Other Operating expenses, net caption.b)
    
    Under US GAAP, once an impairment loss is allocated to the carrying value of the
long-lived assets, the reduced carrying amount represents the new cost basis of the
long-lived assets. As a result, SFAS 144 prohibits entities from reversing the impairment
loss should facts and circumstances change in the future. Under Argentina GAAP, impairment
charges can be reversed in future years due to changes in the above-mentioned facts and
circumstances. As of December 31, 2005, Petrobras Energía recorded a 44 gain related to an
impairment reversal of gas areas in Argentina (See Note 6 Recoverability of investments in
Argentinas oil and gas areas). In the reconciliation to US GAAP included in Note 22, such
gain was reversed. In 2007 and 2006, the reconciliation includes a gain of 5 and 6
corresponding to the reversal of the related higher depreciation.c)
    
    Method of calculating impairment related to property, plant and equipmentFollowing the changes in professional accounting standards under Argentina GAAP described in
Note 2.f, the book value of a long-lived asset is adjusted to its recoverable value if its
carrying amount exceeds the recoverable value in use. From a regulatory standpoint,
recoverable value is defined as the larger of net realizable value and discounted value in
use, defined as the addition of the discounted expected net cash flows that arise as a
direct result of the use and eventual disposition of the assets.Under US GAAP the book value of a long-lived asset is adjusted to its fair value if its
carrying amount exceeds the undiscounted value in use.Under Argentina GAAP, following this guidance, as of December 31, 2007, 2006 and 2005,
Petrobras Energía S.A. recorded valuation allowances of 358, 165 and 190. In the
reconciliation to US GAAP these charges were reversed since under US GAAP, the carrying
amount did not exceed the undiscounted cash flow.The related effect on the depreciation of property, plant and equipment, in the
reconciliation to US GAAP totaled 17, 25 and 12 for the years ended December 31, 2007, 2006
and 2005.Prior to the changes to Argentina GAAP referred to in Note 2.f, there were no substantial
differences between Argentina GAAP and US GAAP in the calculation of impairment of property,
plant and equipment, except for the reversal of the impairment charges discussed in 9.b)
above.
  F-64




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10) Income taxes
  11) Proportional consolidation
   12) Sale of non-current assets to related parties
    13) Minority interest
  B  Explanation of the main differences included in the reconciliation from Argentina GAAP to US
GAAP, applicable to our equity in affiliates
 1) Capitalization of exchange differences
     F-65




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2) Troubled debt restructuring of TGS and Transener.
         F-66




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##### Table of Contents



3) Depreciation of property, plant and equipment
   4) Minority Interest
  5) Income taxes
  C  Presentation
 1) Classification of impairment losses
   2) Balance sheet classification differences related to deferred income tax assets (liabilities)
   3) Accounting for purchases and sales of inventory with the same counterparty
    F-67




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##### Table of Contents



D  Other
 1) Restatements of financial statements for general price-level changes
  E  New accounting standards and developments under US GAAP not yet adopted
 FASB Statement No. 157, Fair Value Measurements (SFAS 157)
  FASB Staff Position FAS No. 157-1, Application of SFAS 157 to FASB Statement No. 13 and its Related
Interpretative Accounting Pronouncements that addresses Leasing Transactions (FSP 157-1)
  FASB Staff Position FAS No. 157-2, Effective Date of SFAS 157 (FSP 157-2)
  FASB Statement 159 The Fair Value Option for Financial Assets and Financial Liabilities (SFAS
159)
  FASB Statement No. 141 (revised 2007), Business Combinations (SFAS 141-R)
   F-68




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FASB Statement No. 160, Non-controlling Interests in Consolidated Financial Statements, an
amendment of ARB No. 51 (SFAS 160)
  F) Recently adopted accounting pronouncements
 FASB Interpretation No. 48, Accounting for the Uncertainty in Income Taxes, An interpretation of
FASB Statement 109 (FIN 48).
  22. Reconciliation of net income and shareholders equity to US GAAP
     F-69




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Reconciliation of net income to US GAAP
 2007
    
    
    2006
    
    
    2005Net income under Argentine GAAP
    
    
    573
    
    
    
    1,064
    
    
    
    729US GAAP adjustments:Foreign currency translation adjustment (Note 21.A.4)
    
    
    9
    
    
    
    7
    
    
    
    (13
    )Amortization of deferred charges (Note 21.A.1)
    
    
    
    
    
    
    7
    
    
    
    9Debt refinancing costs (Note 21.A.2)
    
    
    2
    
    
    
    3
    
    
    
    14Depreciation of Property Plant & EquipmentBusiness combination (Note 21.A.8)
    
    
    (33
    )
    
    
    (14
    )
    
    
    (167
    )Impairment (Note 21.A.9)
    
    
    (12
    )
    
    
    (19
    )
    
    
    (12
    )Other
    
    
    (4
    )
    
    
    (4
    )
    
    
    (21
    )Impairment of property plant & equipment (Note
21.A.9)
    
    
    210
    
    
    
    
    
    
    
    (887
    )Fair value of liabilities (Note 21.A.8.a)
    
    
    
    
    
    
    (1
    )
    
    
    (49
    )Impairment of goodwill (Note 21.A.8.a and Note 21.A.9.a)
    
    
    
    
    
    
    (43
    )
    
    
    Discounted value of assets and liabilities (Note
21.A.5)
    
    
    35
    
    
    
    2
    
    
    
    21Effects of the sale of noncurrent assets to related parties (Note 21.A.12)
    
    
    (1,072
    )
    
    
    
    
    
    
    Minority interest (Note 21.A.13)
    
    
    193
    
    
    
    27
    
    
    
    236Guarantees (Note 21.A.6)
    
    
    4
    
    
    
    
    
    
    
    Inventories (Note 21.A.7)
    
    
    (69
    )
    
    
    10
    
    
    
    (36
    )Deferred income taxes (Note 21.A.10)
    
    
    52
    
    
    
    71
    
    
    
    339Other
    
    
    (20
    )
    
    
    
    
    
    
    US GAAP adjustments applicable to equity in earnings of affiliatesDeferred income taxes (Note 21.B.5)
    
    
    (14
    )
    
    
    (2
    )
    
    
    89Depreciation of property plant and equipment (Note 21.B.3)
    
    
    (19
    )
    
    
    (13
    )
    
    
    (13
    )Capitalized exchange losses (Note 21.B.1)
    
    
    1
    
    
    
    1
    
    
    
    13Impairment of Property Plant & Equipment (Note 21.A.9.a)
    
    
    
    
    
    
    (27
    )
    
    
    Minority interest (Note 21.B.4)
    
    
    (6
    )
    
    
    (1
    )
    
    
    146Reversal of equity in earnings of CIESA and Citelec (i) (Note 21. A.
11)
    
    
    (15
    )
    
    
    (100
    )
    
    
    (222
    )Sale of companies (Note 9.V)
    
    
    135
    
    
    
    
    
    
    
    Debt restructuring (Note 21.B.2)
    
    
    31
    
    
    
    11
    
    
    
    (256
    )Other
    
    
    (4
    )
    
    
    (7
    )
    
    
    3Total US GAAP adjustments
    
    
    (596
    )
    
    
    (92
    )
    
    
    (806
    )Net (loss) income under US GAAP
    
    
    (23
    )
    
    
    972
    
    
    
    (77
    )
 (i)
    
    This adjustment reverses the equity in earnings accounted for under Argentina GAAP and
complements the effects of other US GAAP adjustments recognized in items listed above with
respect to CIESA (2007, 2006 and 2005) and CITELEC (2006 and 2005). As of December 31,
2007, 2006 and 2005, CIESA presented a deficit in shareholders equity under US GAAP, and
therefore it was valued at zero. As of December 31, 2006 and 2005, CITELEC was valued at 28
under US GAAP, which represents its book value as of the date when it was classified as
held for sale. In the year ended December 31, 2007 our interest in CITELEC was sold (see
Note 9.V) and as a result, a gain of 135 was recognized in the reconciliation of net income
under US GAAP.  F-70




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##### Table of Contents



Earnings per share
 2007
    
    
    2006
    
    
    2005Basic / Diluted net (loss) income per share under US GAAP
    
    
    (0.011
    )
    
    
    0.458
    
    
    
    (0.036
    )Basic / Diluted net income per share under Argentine GAAPClass B
    
    
    0.270
    
    
    
    0.501
    
    
    
    0.343Number of shares -in millions (1)
    
    
    2,132
    
    
    
    2,132
    
    
    
    2,132
 (1)
    
    Earnings per share are calculated based on the weighted average number of shares
outstanding during the year. Consolidated statement of comprehensive income and accumulated comprehensive income
 2007
    
    
    2006
    
    
    2005Net (loss) income under US GAAP
    
    
    (23
    )
    
    
    972
    
    
    
    (77
    )Foreign currency translation adjustment (Note 21.A.4)Net change during period
    
    
    18
    
    
    
    17
    
    
    
    38Deferred pension plan obligations (Note 21.A.3)Decrease (increase), net of tax
    
    
    2
    
    
    
    (6
    )
    
    
    (16
    )Deferred hedge gains and losses, net of tax:Reclassification to net income
    
    
    
    
    
    
    
    
    
    
    2Total comprehensive (loss) income
    
    
    (3
    )
    
    
    983
    
    
    
    (53
    )Accumulated Other Comprehensive (loss) income:Amounts not recognized as net periodic pension costs, net of tax (Note 21.A.3)
    
    
    (30
    )
    
    
    (32
    )
    
    
    (26
    )Foreign currency translation adjustment (Note 21.A.4)
    
    
    28
    
    
    
    10
    
    
    
    (7
    )Adjustment to initially apply SFAS 158, net of tax (Note 21.A.3)
    
    
    (21
    )
    
    
    (21
    )
    
    
    Total Accumulated Other Comprehensive Loss
    
    
    (23
    )
    
    
    (43
    )
    
    
    (33
    )
  F-71




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##### Table of Contents



Reconciliation of shareholders equity to US GAAP
 2007
    
    
    2006Shareholders equity under Argentine GAAP
    
    
    6,664
    
    
    
    6,220US GAAP adjustments:Deferred charges (Note 21.A.1)
    
    
    
    
    
    
    (5
    )Debt refinancing costs (Note 21.A.2)
    
    
    (5
    )
    
    
    (6
    )Pension plan obligations (Note 21.A.3)
    
    
    (90
    )
    
    
    (93
    )Foreign currency translation adjustment (Note 21.A.4)
    
    
    (53
    )
    
    
    (63
    )Property plant and equipmentBusiness combination (Note 21.A.8)
    
    
    262
    
    
    
    293Impairment (Note 21.A.9)
    
    
    325
    
    
    
    127Other
    
    
    16
    
    
    
    7Other
    
    
    (10
    )
    
    
    Goodwill (Note 21.A.8.a and Note 21.A.9.a)
    
    
    101
    
    
    
    112Discounted value of assets and liabilities (Note
21.A.5)
    
    
    85
    
    
    
    50Inventories (Note 21.A.7)
    
    
    (101
    )
    
    
    (33
    )Guarantees (Note 21.A.6)
    
    
    (5
    )
    
    
    (9
    )Minority interest (Note 21.A.13)
    
    
    (42
    )
    
    
    30Deferred income taxes (Note 21.A.10)
    
    
    (61
    )
    
    
    (110
    )US GAAP adjustments applicable to equity in affiliatesDeferred income taxes (Note 21.B.5)
    
    
    (43
    )
    
    
    121Property plant and equipment (Note 21.B.3 and Note 21.A.9.a)
    
    
    (5
    )
    
    
    (168
    )Capitalized exchange losses (Note 21.B.1)
    
    
    (29
    )
    
    
    (33
    )Minority interest (Note 21.B.4)
    
    
    (20
    )
    
    
    144Reversal of equity in affiliates of CIESA and Citelec (i) (Note
21. A. 11)
    
    
    (108
    )
    
    
    (50
    )Debt restructuring (Note 21.B.2)
    
    
    
    
    
    
    (293
    )Other
    
    
    (7
    )
    
    
    (46
    )Total US GAAP adjustments
    
    
    210
    
    
    
    (25
    )Shareholders equity under US GAAP
    
    
    6,874
    
    
    
    6,195
 (i)
    
    This amount corresponds to the adjustment to reverse equity in earnings accounted for
under Argentina GAAP and complements the effects of other US GAAP adjustments recognized in
items listed above with respect to CIESA (2007 and 2006) and Citelec (2006). As of December
31, 2007 and 2006, CIESA had negative shareholders equity under US GAAP, and was valued at
zero. As of December 31, 2006 CITELEC was valued at 28, which represented its book value as
of the date when it was classified as held for sale. In the year ended December 31, 2007
our interest in CITELEC was sold (see note 9.V) and as a result, a gain of 135 was
recognized in the reconciliation of net income under US GAAP.  F-72




---



##### Table of Contents



Description of changes in shareholders equity under US GAAP
 2007
    
    
    2006
    
    
    2005Shareholders equity under US GAAP as of beginning of the year
    
    
    6,195
    
    
    
    5,233
    
    
    
    5,286Additional paid-in capital (Note 21.A.12)
    
    
    823
    
    
    
    
    
    
    
    Dividends paid
    
    
    (141
    )
    
    
    
    
    
    
    Other comprehensive income
    
    
    20
    
    
    
    11
    
    
    
    24Net (loss) income under US GAAP
    
    
    (23
    )
    
    
    972
    
    
    
    (77
    )Adjustment to initially apply SFAS 158
    
    
    
    
    
    
    (21
    )
    
    
    Shareholders equity under US GAAP as of the end of the year
    
    
    6,874
    
    
    
    6,195
    
    
    
    5,233
 US GAAP summarized consolidated data
  Year ended December 31,US GAAP consolidated income and loss data
    
    2007
    
    
    2006
    
    
    2005Sales
    
    
    12,974
    
    
    
    11,303
    
    
    
    10,287Less  taxes on sales and services
    
    
    (262
    )
    
    
    (218
    )
    
    
    (158
    )Net sales
    
    
    12,712
    
    
    
    11,085
    
    
    
    10,129Cost of sales
    
    
    (9,672
    )
    
    
    (7,902
    )
    
    
    (6,874
    )Gross profit
    
    
    3,040
    
    
    
    3,183
    
    
    
    3,255Administrative and selling expenses
    
    
    (1,406
    )
    
    
    (1,071
    )
    
    
    (923
    )Exploration expenses
    
    
    (172
    )
    
    
    (117
    )
    
    
    (34
    )Other operating expenses, net
    
    
    (785
    )
    
    
    (61
    )
    
    
    (1,685
    )Operating income
    
    
    677
    
    
    
    1,934
    
    
    
    613Equity in earnings of affiliates
    
    
    164
    
    
    
    151
    
    
    
    57Financial expenses and holding losses, net
    
    
    (439
    )
    
    
    (406
    )
    
    
    (906
    )Income (loss) before income taxes and minority interest
    
    
    402
    
    
    
    1,679
    
    
    
    (236
    )Income tax (expense) benefit
    
    
    (386
    )
    
    
    (398
    )
    
    
    126Minority interest in subsidiaries
    
    
    (39
    )
    
    
    (309
    )
    
    
    33Net (loss) income for the year
    
    
    (23
    )
    
    
    972
    
    
    
    (77
    )
  F-73




---



##### Table of Contents



Year ended December 31,US GAAP condensed consolidated balance sheet data
    
    2007
    
    
    2006Other receivables
    
    
    2,507
    
    
    
    1,265Other current assets
    
    
    3,581
    
    
    
    3,376Current assets
    
    
    6,088
    
    
    
    4,641Investments
    
    
    3,141
    
    
    
    3,521Property, plant and equipment
    
    
    9,130
    
    
    
    9,159Other non current assets
    
    
    947
    
    
    
    696Total non current assets
    
    
    13,218
    
    
    
    13,376Total assets
    
    
    19,306
    
    
    
    18,017Short-term debt (a) (b)
    
    
    1,452
    
    
    
    2,179Other liabilities
    
    
    2,652
    
    
    
    2,343Total current liabilities
    
    
    4,104
    
    
    
    4,522Long-term debt
    
    
    4,613
    
    
    
    3,729Other non current liabilities
    
    
    1,563
    
    
    
    1,679Total non current liabilities
    
    
    6,176
    
    
    
    5,408Total liabilities
    
    
    10,280
    
    
    
    9,930Minority interest in subsidiaries
    
    
    2,152
    
    
    
    1,892Shareholders equity
    
    
    6,874
    
    
    
    6,19519,306
    
    
    
    18,017
 a)
    
    The weighted average annual interest rates for outstanding short-term borrowings were
5.84% and 4.62% as of December 31, 2007 and 2006, respectively.b)
    
    Includes 78 and 1,093 corresponding to current portion of long-term debt for the
fiscal years ended December 31, 2007 and 2006, respectively. Year ended December 31,US GAAP condensed consolidated cash flow data
    
    2007
    
    
    2006
    
    
    2005Net cash provided by operations
    
    
    1,549
    
    
    
    2,551
    
    
    
    1,699Net cash used in investing activities
    
    
    (1,581
    )
    
    
    (1,958
    )
    
    
    (1,598
    )Net cash used in financing activities
    
    
    (133
    )
    
    
    (15
    )
    
    
    (476
    )(Decrease) Increase in cash
    
    
    (165
    )
    
    
    578
    
    
    
    (375
    )Effect of the exchange rate on cash
    
    
    25
    
    
    
    
    
    
    
    9Cash and cash equivalent at the beginning
    
    
    1,111
    
    
    
    533
    
    
    
    899Cash and cash equivalent at the end under US GAAP
    
    
    971
    
    
    
    1,111
    
    
    
    533
  F-74




---



##### Table of Contents



23. Additional financial statements disclosures required by US GAAP and the SEC
 a) Income taxes
  2007
    
    
    2006Deferred tax assetsTax loss carryforwards
    
    
    301
    
    
    
    1,123Inventories
    
    
    39
    
    
    
    13Property, plant and equipment
    
    
    211
    
    
    
    53Reserve for contingencies
    
    
    95
    
    
    
    90Equity interest in affiliates
    
    
    83
    
    
    
    150Pension plan obligations
    
    
    51
    
    
    
    44Other deferred tax assets, not individually significant
    
    
    130
    
    
    
    41Total gross deferred tax assets
    
    
    910
    
    
    
    1,514Less-Valuation allowance
    
    
    (636
    )
    
    
    (1,194
    )Total net deferred tax assets
    
    
    274
    
    
    
    320Deferred tax liabilitiesPrepaid expenses
    
    
    (6
    )
    
    
    (6
    )Property, plant and equipment
    
    
    (827
    )
    
    
    (985
    )Equity interest in affiliates
    
    
    (319
    )
    
    
    (248
    )Other deferred tax liabilities, not individually significant
    
    
    (24
    )
    
    
    (1
    )Total gross deferred tax liabilities
    
    
    (1,176
    )
    
    
    (1,240
    )Net deferred tax liabilities
    
    
    (902
    )
    
    
    (920
    )
  2007
    
    
    2006
    
    
    2005Income (loss) before income tax and minority interest in subsidiaries
    
    
    402
    
    
    
    1,679
    
    
    
    (236
    )Statutory tax rate
    
    
    35
    %
    
    
    35
    %
    
    
    35
    %Statutory tax rate applied to pre-tax income (loss)
    
    
    141
    
    
    
    588
    
    
    
    (83
    )Equity in earnings of affiliates
    
    
    233
    
    
    
    (185
    )
    
    
    (227
    )Remeasurement and foreign earnings
    
    
    (67
    )
    
    
    29
    
    
    
    (2
    )Change in valuation allowance
    
    
    (182
    )
    
    
    (81
    )
    
    
    147Impairment, amortization and other decreases of goodwill
    
    
    
    
    
    
    15
    
    
    
    Tax adjustments and other, net
    
    
    (2
    )
    
    
    32
    
    
    
    39Deconsolidation of companies
    
    
    (103
    )
    
    
    
    
    
    
    Statute of limitation of tax losses carryfoward
    
    
    366
    
    
    
    
    
    
    
    Tax expense (benefit)
    
    
    386
    
    
    
    398
    
    
    
    (126
    )
  F-75




---



##### Table of Contents



2007
    
    
    2006
    
    
    2005CurrentArgentina
    
    
    51
    
    
    
    6
    
    
    
    15Foreign
    
    
    353
    
    
    
    290
    
    
    
    129404
    
    
    
    296
    
    
    
    144DeferredArgentina
    
    
    32
    
    
    
    109
    
    
    
    (444
    )Foreign
    
    
    (50
    )
    
    
    (7
    )
    
    
    174(18
    )
    
    
    102
    
    
    
    (270
    )Total tax expense (benefit)
    
    
    386
    
    
    
    398
    
    
    
    (126
    )
  2009
    
    
    4712010 and thereafter
    
    
    213684
 Effect of adopting FASB Interpretation No. 48 Accounting for Uncertainty in Income Taxes
    b) Fair value of financial instruments
   F-76




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##### Table of Contents



2007
    
    
    2006Carrying
    
    
    
    
    
    
    Carryingamount
    
    
    
    
    
    
    amountunder
    
    
    Fair
    
    
    under
    
    
    FairUS GAAP
    
    
    Value
    
    
    US GAAP
    
    
    ValueFinancial liabilities:Long-term debt
    
    
    4,613
    
    
    
    4,662
    
    
    
    3,729
    
    
    
    3,877
 c) Summarized financial information of unconsolidated affiliates
   
    
    Oil and Gas Exploration and Production:Petrolera Entre Lomas S.A., Inversora Mata S.A.,
Coroil S.A., Petroritupano S.A. (1), Petrowayú S.A. (1), Petrovenbras S.A. (1), Petrokariña
S.A. (1), Oleoductos del Valle S.A. and Oleoducto de Crudos Pesados Ltd.
    
    Refining and Distribution: Refinería del Norte S.A. and Petrobras Bolivia Refinación S.A. (2)
    
    Petrochemical: Petroquímica Cuyo S.A.I.C. (2)
    
    Gas, Energy and Electricity: Citelec S.A. (2), Yacylec S.A. (2) and Uruguaí S.A.
 (1)
    
    These companies were added in 2006.(2)
    
    Companies sold in the year ended December 31, 2007 (see Note 9.V) 2007Gas and EnergyOil and Gas
    
    
    
    
    
    
    
    
    
    
    Marketing andExploration
    
    
    Refining and
    
    
    
    
    
    
    Transportationand Production
    
    
    Distribution
    
    
    Petrochemical
    
    
    of Gas
    
    
    ElectricityCurrent Assets
    
    
    5,988
    
    
    
    553
    
    
    
    
    
    
    
    
    
    
    
    Non Current Assets
    
    
    7,322
    
    
    
    422
    
    
    
    
    
    
    
    
    
    
    
    Current Liabilities
    
    
    3,726
    
    
    
    416
    
    
    
    
    
    
    
    
    
    
    
    Non Current Liabilities
    
    
    4,657
    
    
    
    49
    
    
    
    
    
    
    
    
    
    
    
    Shareholders Equity
    
    
    4,927
    
    
    
    510
    
    
    
    
    
    
    
    
    
    
    
    Sales
    
    
    4,049
    
    
    
    1,485
    
    
    
    
    
    
    
    
    
    
    
    Gross profit
    
    
    2,628
    
    
    
    411
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    
    899
    
    
    
    154
    
    
    
    
    
    
    
    
    
    
    
    
  F-77




---



##### Table of Contents



2006Gas and EnergyOil and Gas
    
    
    
    
    
    
    
    
    
    
    Marketing andExploration and
    
    
    Refining and
    
    
    
    
    
    
    TransportationProduction
    
    
    Distribution
    
    
    Petrochemical
    
    
    of Gas
    
    
    ElectricityCurrent Assets
    
    
    2,812
    
    
    
    1,374
    
    
    
    172
    
    
    
    
    
    
    
    205Non Current Assets
    
    
    6,587
    
    
    
    606
    
    
    
    132
    
    
    
    
    
    
    
    1,966Current Liabilities
    
    
    1,945
    
    
    
    1,074
    
    
    
    111
    
    
    
    
    
    
    
    180Non Current Liabilities
    
    
    3,712
    
    
    
    153
    
    
    
    49
    
    
    
    
    
    
    
    1,141Shareholders Equity
    
    
    3,742
    
    
    
    753
    
    
    
    144
    
    
    
    
    
    
    
    440Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    410Sales
    
    
    3,308
    
    
    
    4,229
    
    
    
    470
    
    
    
    
    
    
    
    501Gross profit
    
    
    1,582
    
    
    
    605
    
    
    
    80
    
    
    
    
    
    
    
    168Net income
    
    
    377
    
    
    
    272
    
    
    
    35
    
    
    
    
    
    
    
    34
 2005Gas and EnergyOil and Gas
    
    
    
    
    
    
    
    
    
    
    Marketing andExploration
    
    
    Refining and
    
    
    
    
    
    
    Transportationand Production
    
    
    Distribution
    
    
    Petrochemical
    
    
    of Gas
    
    
    ElectricitySales
    
    
    1,384
    
    
    
    2,931
    
    
    
    337
    
    
    
    
    
    
    
    431Gross profit
    
    
    784
    
    
    
    491
    
    
    
    64
    
    
    
    
    
    
    
    126Net income
    
    
    168
    
    
    
    278
    
    
    
    19
    
    
    
    
    
    
    
    407
 d) Summarized financial information of proportionally consolidated jointly controlled companies
  2007
    
    
    2006
    
    
    2005CIESA (a)
    
    
    Distrilec
    
    
    PVIE (b)
    
    
    Total
    
    
    CIESA (a)
    
    
    Distrilec
    
    
    Total
    
    
    CIESA (a)
    
    
    Distrilec
    
    
    TotalCurrent Assets
    
    
    343
    
    
    
    252
    
    
    
    372
    
    
    
    967
    
    
    
    366
    
    
    
    183
    
    
    
    549
    
    
    
    
    
    
    
    
    
    
    
    Non Current Assets
    
    
    2,224
    
    
    
    1,407
    
    
    
    789
    
    
    
    4,420
    
    
    
    2,278
    
    
    
    1,342
    
    
    
    3,620
    
    
    
    
    
    
    
    
    
    
    
    Current Liabilities
    
    
    617
    
    
    
    383
    
    
    
    298
    
    
    
    1,298
    
    
    
    620
    
    
    
    256
    
    
    
    876
    
    
    
    
    
    
    
    
    
    
    
    Non Current Liabilities
    
    
    1,259
    
    
    
    330
    
    
    
    297
    
    
    
    1,886
    
    
    
    1,384
    
    
    
    419
    
    
    
    1,803
    
    
    
    
    
    
    
    
    
    
    
    Shareholders Equity
    
    
    218
    
    
    
    560
    
    
    
    564
    
    
    
    1,342
    
    
    
    211
    
    
    
    509
    
    
    
    720
    
    
    
    
    
    
    
    
    
    
    
    Minority Interest
    
    
    473
    
    
    
    386
    
    
    
    2
    
    
    
    861
    
    
    
    429
    
    
    
    341
    
    
    
    770
    
    
    
    
    
    
    
    
    
    
    
    Sales
    
    
    602
    
    
    
    894
    
    
    
    1,101
    
    
    
    2,597
    
    
    
    632
    
    
    
    695
    
    
    
    1,327
    
    
    
    513
    
    
    
    651
    
    
    
    1,164Gross Profit
    
    
    287
    
    
    
    215
    
    
    
    573
    
    
    
    1,075
    
    
    
    312
    
    
    
    101
    
    
    
    413
    
    
    
    243
    
    
    
    97
    
    
    
    340Net Income (loss)
    
    
    7
    
    
    
    51
    
    
    
    839
    
    
    
    897
    
    
    
    71
    
    
    
    (37
    )
    
    
    34
    
    
    
    42
    
    
    
    (8
    )
    
    
    34Cash provided by (used in):Operating activities
    
    
    304
    
    
    
    224
    
    
    
    312
    
    
    
    840
    
    
    
    326
    
    
    
    45
    
    
    
    371
    
    
    
    
    
    
    
    
    
    
    
    Investing activities
    
    
    (116
    )
    
    
    (131
    )
    
    
    71
    
    
    
    (176
    )
    
    
    (64
    )
    
    
    (70
    )
    
    
    (134
    )
    
    
    
    
    
    
    
    
    
    
    Financing activities
    
    
    (231
    )
    
    
    (89
    )
    
    
    (375
    )
    
    
    (695
    )
    
    
    (280
    )
    
    
    33
    
    
    
    (247
    )
    
    
    
    
    
    
    
    
    
    
    
 (a)
    
    For US GAAP reporting purposes, CIESA was not proportionally consolidated, as explained
in Note 21 A.11)(b)
    
    Considering that the sale of the 40% equity interest in PVIE was celebrated in December
2007 (Note 9.V), the consolidated statements of income and cash flows show the participation
in PVIE according to the procedure indicated for the consolidation of controlled companies.  F-78




---



##### Table of Contents



e) Pension plan:
 Defined benefit plan:
   2007
    
    
    2006
    
    
    2005Change in projected benefit obligationProjected Benefit Obligation at beginning
    
    
    161
    
    
    
    99
    
    
    
    68Service cost
    
    
    3
    
    
    
    2
    
    
    
    1Interest cost
    
    
    21
    
    
    
    16
    
    
    
    6Actuarial loss
    
    
    1
    
    
    
    15
    
    
    
    26Benefits paid
    
    
    (10
    )
    
    
    (7
    )
    
    
    (7
    )Unrecognized prior service cost
    
    
    
    
    
    
    36
    
    
    
    5Projected benefit obligation at the end of the year (1)
    
    
    176
    
    
    
    161
    
    
    
    99Accumulated benefit obligation at end of year
    
    
    176
    
    
    
    161
    
    
    
    99Change in plan assetsFair value of plan assets at beginning
    
    
    35
    
    
    
    40
    
    
    
    45Return on plan assets
    
    
    3
    
    
    
    2
    
    
    
    2Benefits paid
    
    
    (7
    )
    
    
    (7
    )
    
    
    (7
    )Fair value of plan assets at the end of the year (2)
    
    
    31
    
    
    
    35
    
    
    
    40Status of the plansUnfunded status at year end
    
    
    (145
    )
    
    
    (126
    )
    
    
    (59
    )
 (1)
    
    As of December 31, 2007, 2006 and 2005, the Projected Benefit Obligation is comprised of
124, 118 and 94 corresponding to the Compensatory Fund, and 52, 43 and 5 corresponding to
the indemnity plan, respectively.(2)
    
    Both for December 31, 2007 and 2006 all assets contributed correspond to the
Compensatory Fund (Note 15.b)  F-79




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##### Table of Contents



2007
    
    
    2006
    
    
    2005Amounts recorded in the consolidated balance sheet consists of:Total liabilities
    
    
    (145
    )
    
    
    (126
    )
    
    
    (59
    )Intangible Assets
    
    
    
    
    
    
    
    
    
    
    5Cumulative amounts recorded in Accumulated other comprehensive income
consists of:Unrecognized prior service cost
    
    
    38
    
    
    
    40
    
    
    
    Unrecognized actuarial loss
    
    
    52
    
    
    
    53
    
    
    
    41Total
recored in Accumulated other comprehensive income at year end, before tax
    
    
    90
    
    
    
    93
    
    
    
    41
 2007
    
    
    2006Reconciliation of amounts recognized in Accumulated other comprehensive incomeAmounts recorded before tax at beginning of year
    
    
    93
    
    
    
    41Reclassification of intangible assets due to SFAS 158
    
    
    
    
    
    
    40Change in unrecognized actuarial loss
    
    
    1
    
    
    
    14Amortization of actuarial loss recognized in net periodic benefit cost
    
    
    (4
    )
    
    
    (2
    )Amounts recorded before tax at end of year
    
    
    90
    
    
    
    93
 2007
    
    
    2006
    
    
    2005Components of net periodic pension benefit costService cost
    
    
    3
    
    
    
    2
    
    
    
    1Interest cost
    
    
    21
    
    
    
    16
    
    
    
    6Return on plan assets
    
    
    (3
    )
    
    
    (2
    )
    
    
    (2
    )Amortization of actuarial gain and losses and unrecognized prior service cost
    
    
    4
    
    
    
    2
    
    
    
    Net periodic benefit cost
    
    
    25
    
    
    
    18
    
    
    
    5Weighted-average assumptionsDiscount rate
    
    
    4
    %
    
    
    4
    %
    
    
    4
    %Rate of return on plan assets
    
    
    6
    %
    
    
    6
    %
    
    
    4
    %Rate of compensation increase
    
    
    2
    %
    
    
    2
    %
    
    
    2
    %
    2008
    
    
    132009
    
    
    122010
    
    
    112011
    
    
    112012
    
    
    142013-2017
    
    
    65
 Adoption of SFAS 158 Employers Accounting for Defined Benefit Pension and Other Postretirement
Plans
   F-80




---



##### Table of Contents



Balances prior toSFAS No. 158
    
    
    
    
    
    
    Balances after toAdoption
    
    
    Adjustments
    
    
    SFAS No. 158Intangible assets
    
    
    40
    
    
    
    (40
    )
    
    
    Accumulated other comprehensive loss
    
    
    53
    
    
    
    40
    
    
    
    93Liabilities
    
    
    126
    
    
    
    
    
    
    
    126Deferred tax assets
    
    
    30
    
    
    
    14
    
    
    
    44
  Accumulated other comprehensive income (loss), before the effect of income taxes and minority
interest
 Pension Benefits
 Prior service cost
    
    
    38Net actuarial loss
    
    
    52
 Amounts expected to be recognized in 2008 net periodic benefit cost, before the effect of income
taxes and minority interest
 Pension Benefits
 Prior service cost
    
    
    2Net actuarial loss
    
    
    2
 f) Business segment consolidated information
   F-81




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##### Table of Contents



2007Gas and EnergyOil and Gas
    
    
    
    
    
    
    
    
    
    
    Marketing andExploration and
    
    
    Refining and
    
    
    
    
    
    
    Transportation of
    
    
    
    
    
    
    Corporate andProduction
    
    
    Distribution
    
    
    Petrochemical
    
    
    Gas
    
    
    Electricity
    
    
    Eliminations
    
    
    TotalUnaffiliated revenues
    
    
    3,005
    
    
    
    5,606
    
    
    
    3,034
    
    
    
    1,188
    
    
    
    1,400
    
    
    
    (775
    )
    
    
    13,458Intersegment revenues
    
    
    1,619
    
    
    
    220
    
    
    
    29
    
    
    
    213
    
    
    
    25
    
    
    
    (2,106
    )
    
    
    Total revenues
    
    
    4,624
    
    
    
    5,826
    
    
    
    3,063
    
    
    
    1,401
    
    
    
    1,425
    
    
    
    (2,881
    )
    
    
    13,458Depreciation, depletion
and amortization
    
    
    (782
    )
    
    
    (56
    )
    
    
    (100
    )
    
    
    (95
    )
    
    
    (158
    )
    
    
    (26
    )
    
    
    (1,217
    )Equity in earnings of
unconsolidated affiliates
    
    
    80
    
    
    
    75
    
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    176Interest expense
    
    
    (134
    )
    
    
    (4
    )
    
    
    (20
    )
    
    
    (108
    )
    
    
    (43
    )
    
    
    (278
    )
    
    
    (587
    )Interest revenue
    
    
    33
    
    
    
    
    
    
    
    9
    
    
    
    7
    
    
    
    20
    
    
    
    27
    
    
    
    96Dividends received from
unconsolidated
affiliates
    
    
    179
    
    
    
    79
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    264Additions to property,
plant and equipment
    
    
    847
    
    
    
    250
    
    
    
    279
    
    
    
    76
    
    
    
    224
    
    
    
    17
    
    
    
    1,693Identifiable assets
    
    
    5,568
    
    
    
    2,791
    
    
    
    2,059
    
    
    
    2,723
    
    
    
    2,567
    
    
    
    2,693
    
    
    
    18,401Investments in and
advances to
unconsolidated affiliates
    
    
    2,786
    
    
    
    146
    
    
    
    
    
    
    
    23
    
    
    
    1
    
    
    
    
    
    
    
    2,956Total assets
    
    
    8,354
    
    
    
    2,937
    
    
    
    2,059
    
    
    
    2,746
    
    
    
    2,568
    
    
    
    2,693
    
    
    
    21,357
 2006Gas and EnergyOil and Gas
    
    
    
    
    
    
    
    
    
    
    Marketing andExploration and
    
    
    Refining and
    
    
    
    
    
    
    Transportation of
    
    
    
    
    
    
    Corporate andProduction
    
    
    Distribution
    
    
    Petrochemical
    
    
    Gas
    
    
    Electricity
    
    
    Eliminations
    
    
    TotalUnaffiliated revenues
    
    
    2,653
    
    
    
    4,262
    
    
    
    2,447
    
    
    
    1,202
    
    
    
    1,181
    
    
    
    
    
    
    
    11,745Intersegment revenues
    
    
    2,128
    
    
    
    269
    
    
    
    43
    
    
    
    184
    
    
    
    26
    
    
    
    (2,650
    )
    
    
    Total revenues
    
    
    4,781
    
    
    
    4,531
    
    
    
    2,490
    
    
    
    1,386
    
    
    
    1,207
    
    
    
    (2,650
    )
    
    
    11,745Depreciation, depletion
and amortization
    
    
    (720
    )
    
    
    (62
    )
    
    
    (80
    )
    
    
    (93
    )
    
    
    (139
    )
    
    
    (27
    )
    
    
    (1,121
    )Equity in earnings of
unconsolidated affiliates
    
    
    89
    
    
    
    114
    
    
    
    15
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    219Interest expense
    
    
    (221
    )
    
    
    (4
    )
    
    
    (25
    )
    
    
    (130
    )
    
    
    (23
    )
    
    
    (208
    )
    
    
    (611
    )Interest revenue
    
    
    35
    
    
    
    
    
    
    
    5
    
    
    
    15
    
    
    
    18
    
    
    
    35
    
    
    
    108Dividends received from
unconsolidated
affiliates
    
    
    35
    
    
    
    76
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    116Additions to property,
plant and equipment
    
    
    1,327
    
    
    
    238
    
    
    
    194
    
    
    
    68
    
    
    
    82
    
    
    
    1
    
    
    
    1,910Identifiable assets
    
    
    6,891
    
    
    
    2,246
    
    
    
    1,678
    
    
    
    2,808
    
    
    
    2,291
    
    
    
    1,322
    
    
    
    17,236Investments in and
advances to
unconsolidated affiliates
    
    
    2,861
    
    
    
    306
    
    
    
    51
    
    
    
    24
    
    
    
    1
    
    
    
    
    
    
    
    3,243Total assets
    
    
    9,752
    
    
    
    2,552
    
    
    
    1,729
    
    
    
    2,832
    
    
    
    2,292
    
    
    
    1,322
    
    
    
    20,479
  F-82




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##### Table of Contents



2005Gas and EnergyOil and Gas
    
    
    
    
    
    
    
    
    
    
    Marketing andExploration and
    
    
    Refining and
    
    
    
    
    
    
    Transportation of
    
    
    
    
    
    
    Corporate andProduction
    
    
    Distribution
    
    
    Petrochemical
    
    
    Gas
    
    
    Electricity
    
    
    Eliminations
    
    
    TotalUnaffiliated revenues
    
    
    2,935
    
    
    
    3,572
    
    
    
    2,140
    
    
    
    1,009
    
    
    
    999
    
    
    
    
    
    
    
    10,655Intersegment revenues
    
    
    1,722
    
    
    
    284
    
    
    
    38
    
    
    
    110
    
    
    
    18
    
    
    
    (2,172
    )
    
    
    Total revenues
    
    
    4,657
    
    
    
    3,856
    
    
    
    2,178
    
    
    
    1,119
    
    
    
    1,017
    
    
    
    (2,172
    )
    
    
    10,655Depreciation, depletion
and amortization
    
    
    (820
    )
    
    
    (65
    )
    
    
    (69
    )
    
    
    (90
    )
    
    
    (137
    )
    
    
    (28
    )
    
    
    (1,209
    )Equity in earnings of
unconsolidated affiliates
    
    
    15
    
    
    
    101
    
    
    
    7
    
    
    
    18
    
    
    
    140
    
    
    
    
    
    
    
    281Interest expense
    
    
    (303
    )
    
    
    (5
    )
    
    
    (26
    )
    
    
    (106
    )
    
    
    (1
    )
    
    
    (145
    )
    
    
    (586
    )Interest revenue
    
    
    33
    
    
    
    1
    
    
    
    9
    
    
    
    7
    
    
    
    11
    
    
    
    27
    
    
    
    88Dividends received from
unconsolidated
affiliates
    
    
    22
    
    
    
    40
    
    
    
    7
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    72Additions to property,
plant and equipment
    
    
    1,302
    
    
    
    177
    
    
    
    95
    
    
    
    72
    
    
    
    60
    
    
    
    70
    
    
    
    1,776Identifiable assets
    
    
    8,839
    
    
    
    1,874
    
    
    
    1,465
    
    
    
    2,695
    
    
    
    2,254
    
    
    
    660
    
    
    
    17,787Investments in and
advances to
unconsolidated affiliates
    
    
    331
    
    
    
    279
    
    
    
    38
    
    
    
    135
    
    
    
    31
    
    
    
    
    
    
    
    814Total assets
    
    
    9,170
    
    
    
    2,153
    
    
    
    1,503
    
    
    
    2,830
    
    
    
    2,285
    
    
    
    660
    
    
    
    18,601
 g) Exploratory well costs
  Aging of capitalized exploratory well costs
 2007
    
    
    2006
    
    
    2005Amount
    
    
    Wells
    
    
    Amount
    
    
    Wells
    
    
    Amount
    
    
    WellsLess than one year
    
    
    117
    
    
    
    20
    
    
    
    91
    
    
    
    23
    
    
    
    56
    
    
    
    12Between one and
three years
    
    
    30
    
    
    
    1
    
    
    
    15
    
    
    
    3
    
    
    
    5
    
    
    
    2Total
    
    
    147
    
    
    
    21
    
    
    
    106
    
    
    
    26
    
    
    
    61
    
    
    
    14
   F-83




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##### Table of Contents



24. Oil and Gas Supplementary Disclosures (Unaudited)
   Capitalized costs
  2007
    
    
    2006Argentina
    
    
    
    
    
    
    ArgentinaGAAP
    
    
    US GAAP
    
    
    GAAP
    
    
    US GAAP(in millions of constant pesos  note 2.c.)Consolidated companies:Proved properties:Equipment, camps and other facilities
    
    
    3,180
    
    
    
    3,070
    
    
    
    2,837
    
    
    
    2,727Mining properties and wells
    
    
    7,456
    
    
    
    6,434
    
    
    
    7,163
    
    
    
    6,069Unproved properties
    
    
    92
    
    
    
    92
    
    
    
    107
    
    
    
    107Total capitalized costs
    
    
    10,728
    
    
    
    9,596
    
    
    
    10,107
    
    
    
    8,903Accumulated depreciation and allowances
which reduce the value of assets
    
    
    (6,470
    )
    
    
    (5,006
    )
    
    
    (5,200
    )
    
    
    (3,858
    )Subtotal of consolidated companies
    
    
    4,258
    
    
    
    4,590
    
    
    
    4,907
    
    
    
    5,045Companys share in capitalized costs by
unconsolidated affiliates
    
    
    2,275
    
    
    
    2,290
    
    
    
    2,426
    
    
    
    2,448Total net capitalized costs
    
    
    6,533
    
    
    
    6,880
    
    
    
    7,333
    
    
    
    7,493
 Costs incurred
   F-84




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##### Table of Contents



2007
    
    
    2006Argentina and US GAAP
    
    
    Argentina and US GAAPRest of
    
    
    
    
    
    
    
    
    
    
    Rest ofLatin-
    
    
    
    
    
    
    
    
    
    
    Latin-Argentina
    
    
    America
    
    
    Total
    
    
    Argentina
    
    
    America
    
    
    TotalConsolidated companies:Acquisition of properties:- Proved
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    - Unproved
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exploration costs
    
    
    127
    
    
    
    49
    
    
    
    176
    
    
    
    130
    
    
    
    60
    
    
    
    190Development costs
    
    
    820
    
    
    
    614
    
    
    
    1,434
    
    
    
    665
    
    
    
    589
    
    
    
    1,254Subtotal costs incurred by consolidated companies
    
    
    947
    
    
    
    663
    
    
    
    1,610
    
    
    
    795
    
    
    
    649
    
    
    
    1,444Companys share in costs incurred by unconsolidated affiliates
    
    
    17
    
    
    
    205
    
    
    
    222
    
    
    
    9
    
    
    
    55
    
    
    
    64Total costs incurred
    
    
    964
    
    
    
    868
    
    
    
    1,832
    
    
    
    804
    
    
    
    704
    
    
    
    1,508
 2005Argentina and US GAAPRest ofLatin-Argentina
    
    
    America
    
    
    TotalConsolidated companies:Acquisition of properties:- Proved
    
    
    
    
    
    
    
    
    
    
    - Unproved
    
    
    
    
    
    
    
    
    
    
    Exploration costs
    
    
    90
    
    
    
    2
    
    
    
    92Development costs
    
    
    583
    
    
    
    835
    
    
    
    1,418Subtotal costs incurred by consolidated companies
    
    
    673
    
    
    
    837
    
    
    
    1,510Companys share in costs incurred by unconsolidated affiliates
    
    
    10
    
    
    
    3
    
    
    
    13Total costs incurred
    
    
    683
    
    
    
    840
    
    
    
    1,523
  F-85




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##### Table of Contents



Results of operations
  2007Argentina GAAP
    
    
    US GAAPRest of
    
    
    
    
    
    
    
    
    
    
    Rest ofLatin-
    
    
    
    
    
    
    
    
    
    
    Latin-Argentina
    
    
    America
    
    
    Total
    
    
    Argentina
    
    
    America
    
    
    Total(in millions of constant pesos - note 2.c)Results of operations of consolidated companies:Net sales:- to third parties
    
    
    274
    
    
    
    2,121
    
    
    
    2,395
    
    
    
    274
    
    
    
    2,121
    
    
    
    2,395- transfers to other operations
    
    
    2,229
    
    
    
    
    
    
    
    2,229
    
    
    
    2,229
    
    
    
    
    
    
    
    2,229Total net sales
    
    
    2,503
    
    
    
    2,121
    
    
    
    4,624
    
    
    
    2,503
    
    
    
    2,121
    
    
    
    4,624Production costs:- Operating costs
    
    
    (569
    )
    
    
    (192
    )
    
    
    (761
    )
    
    
    (569
    )
    
    
    (192
    )
    
    
    (761
    )- Royalties and other
    
    
    (469
    )
    
    
    (910
    )
    
    
    (1,379
    )
    
    
    (469
    )
    
    
    (910
    )
    
    
    (1,379
    )Total production costs
    
    
    (1,038
    )
    
    
    (1,102
    )
    
    
    (2,140
    )
    
    
    (1,038
    )
    
    
    (1,102
    )
    
    
    (2,140
    )Exploration costs
    
    
    (121
    )
    
    
    (51
    )
    
    
    (172
    )
    
    
    (121
    )
    
    
    (51
    )
    
    
    (172
    )Depreciation, depletion, amortization and
allowances which reduce the value of assets
    
    
    (576
    )
    
    
    (965
    )
    
    
    (1,541
    )
    
    
    (606
    )
    
    
    (753
    )
    
    
    (1,359
    )Results of operations before income tax
    
    
    768
    
    
    
    3
    
    
    
    771
    
    
    
    738
    
    
    
    215
    
    
    
    953Income tax
    
    
    (269
    )
    
    
    (249
    )
    
    
    (518
    )
    
    
    (256
    )
    
    
    (255
    )
    
    
    (511
    )Results of operations  consolidated companies
    
    
    499
    
    
    
    (246
    )
    
    
    253
    
    
    
    482
    
    
    
    (40
    )
    
    
    442Companys share in results of operations by
unconsolidated affiliates
    
    
    29
    
    
    
    29
    
    
    
    58
    
    
    
    25
    
    
    
    29
    
    
    
    54Total Results of oil and gas operations
    
    
    528
    
    
    
    (217
    )
    
    
    311
    
    
    
    507
    
    
    
    (11
    )
    
    
    496
  F-86




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##### Table of Contents



2006Argentina GAAP
    
    
    US GAAPRest of
    
    
    
    
    
    
    
    
    
    
    Rest ofLatin-
    
    
    
    
    
    
    
    
    
    
    Latin-Argentina
    
    
    America
    
    
    Total
    
    
    Argentina
    
    
    America
    
    
    Total(in millions of constant
pesos  note 2.c)Results of operations of consolidated companies:Net sales:- to third parties
    
    
    566
    
    
    
    2,087
    
    
    
    2,653
    
    
    
    566
    
    
    
    2,087
    
    
    
    2,653- transfers to other operations
    
    
    2,128
    
    
    
    
    
    
    
    2,128
    
    
    
    2,128
    
    
    
    
    
    
    
    2,128Total net sales
    
    
    2,694
    
    
    
    2,087
    
    
    
    4,781
    
    
    
    2,694
    
    
    
    2,087
    
    
    
    4,781Production costs:- Operating costs
    
    
    (484
    )
    
    
    (218
    )
    
    
    (702
    )
    
    
    (484
    )
    
    
    (218
    )
    
    
    (702
    )- Royalties and other
    
    
    (359
    )
    
    
    (684
    )
    
    
    (1,043
    )
    
    
    (359
    )
    
    
    (684
    )
    
    
    (1,043
    )Total production costs
    
    
    (843
    )
    
    
    (902
    )
    
    
    (1,745
    )
    
    
    (843
    )
    
    
    (902
    )
    
    
    (1,745
    )Exploration costs
    
    
    (68
    )
    
    
    (49
    )
    
    
    (117
    )
    
    
    (68
    )
    
    
    (49
    )
    
    
    (117
    )Depreciation, depletion, amortization and allowances which reduce
the value of assets
    
    
    (485
    )
    
    
    (225
    )
    
    
    (710
    )
    
    
    (523
    )
    
    
    (223
    )
    
    
    (746
    )Results of operations before income tax
    
    
    1,298
    
    
    
    911
    
    
    
    2,209
    
    
    
    1,260
    
    
    
    913
    
    
    
    2,173Income tax
    
    
    (454
    )
    
    
    (308
    )
    
    
    (762
    )
    
    
    (441
    )
    
    
    (309
    )
    
    
    (750
    )Results of operations  consolidated companies
    
    
    844
    
    
    
    603
    
    
    
    1,447
    
    
    
    819
    
    
    
    604
    
    
    
    1,423Companys share in results of operations by unconsolidated affiliates
    
    
    32
    
    
    
    40
    
    
    
    72
    
    
    
    27
    
    
    
    40
    
    
    
    67Total Results of oil and gas operations
    
    
    876
    
    
    
    643
    
    
    
    1,519
    
    
    
    846
    
    
    
    644
    
    
    
    1,490
  F-87




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##### Table of Contents



2005Argentina GAAP
    
    
    US GAAPRest of
    
    
    
    
    
    
    
    
    
    
    Rest ofLatin-
    
    
    
    
    
    
    
    
    
    
    Latin-Argentina
    
    
    America
    
    
    Total
    
    
    Argentina
    
    
    America
    
    
    Total(in millions of constant
pesos  note 2.c)Results of operations of consolidated companies:Net sales:- to third parties
    
    
    458
    
    
    
    2,477
    
    
    
    2,935
    
    
    
    458
    
    
    
    2,477
    
    
    
    2,935- transfers to other operations
    
    
    1,722
    
    
    
    
    
    
    
    1,722
    
    
    
    1,722
    
    
    
    
    
    
    
    1,722Total net sales
    
    
    2,180
    
    
    
    2,477
    
    
    
    4,657
    
    
    
    2,180
    
    
    
    2,477
    
    
    
    4,657Production costs:- Operating costs
    
    
    (378
    )
    
    
    (328
    )
    
    
    (706
    )
    
    
    (378
    )
    
    
    (328
    )
    
    
    (706
    )- Royalties and other
    
    
    (306
    )
    
    
    (635
    )
    
    
    (941
    )
    
    
    (306
    )
    
    
    (635
    )
    
    
    (941
    )Total production costs
    
    
    (684
    )
    
    
    (963
    )
    
    
    (1,647
    )
    
    
    (684
    )
    
    
    (963
    )
    
    
    (1,647
    )Exploration costs
    
    
    (32
    )
    
    
    (2
    )
    
    
    (34
    )
    
    
    (32
    )
    
    
    (2
    )
    
    
    (34
    )Depreciation, depletion, amortization and allowances which reduce
the value of assets
    
    
    (506
    )
    
    
    (650
    )
    
    
    (1,156
    )
    
    
    (448
    )
    
    
    (1,720
    )
    
    
    (2,168
    )Results of operations before income tax
    
    
    958
    
    
    
    862
    
    
    
    1,820
    
    
    
    1,016
    
    
    
    (208
    )
    
    
    808Income tax
    
    
    (328
    )
    
    
    (612
    )
    
    
    (940
    )
    
    
    (357
    )
    
    
    (238
    )
    
    
    (595
    )Results of operations  consolidated companies
    
    
    630
    
    
    
    250
    
    
    
    880
    
    
    
    659
    
    
    
    (446
    )
    
    
    213Companys share in results of operations by unconsolidated affiliates
    
    
    26
    
    
    
    (11
    )
    
    
    15
    
    
    
    22
    
    
    
    (43
    )
    
    
    (21
    )Total Results of oil and gas operations
    
    
    656
    
    
    
    239
    
    
    
    895
    
    
    
    681
    
    
    
    (489
    )
    
    
    192
  F-88




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##### Table of Contents



Estimated oil and gas reserves
      F-89




---



##### Table of Contents



CRUDE OIL, CONDENSATE AND NATURAL GAS LIQUIDSIN THOUSANDS OF BARRELS
    
    
    NATURAL GAS IN MILLION OF CUBIC FEETCONSOLIDATED
    
    
    UNCONSOLIDATED
    
    
    CONSOLIDATEDCOMPANIES
    
    
    COMPANIES
    
    
    COMPANIES
    
    
    UNCONSOLIDATED COMPANIESREST OF
    
    
    
    
    
    
    REST OF
    
    
    
    
    
    
    
    
    
    
    REST OF
    
    
    
    
    
    
    REST OFLATIN -
    
    
    
    
    
    
    LATIN -
    
    
    
    
    
    
    
    
    
    
    LATIN -
    
    
    
    
    
    
    LATIN -Proved reserves (developed and undeveloped)
    
    ARGENTINA
    
    
    AMERICA
    
    
    ARGENTINA
    
    
    AMERICA
    
    
    TOTAL
    
    
    ARGENTINA
 
    
    AMERICA
 
    
    ARGENTINA
    
    
    AMERICA
    
    
    TOTALReserves as of December 31,2004* (1)
    
    
    170,173
    
    
    
    397,330
    
    
    
    6,117
    
    
    
    9,136
    
    
    
    582,756
    
    
    
    1,085,885
    
    
    
    365,987
    
    
    
    13,630
    
    
    
    
    
    
    
    1,465,502Increase (Decrease) originated in:Revisions of previous estimates
    
    
    (7,066
    )
    
    
    4,807
    
    
    
    (99
    )
    
    
    (624
    )
    
    
    (2,982
    )
    
    
    (88,102
    )
    
    
    22,612
    
    
    
    238
    
    
    
    
    
    
    
    (65,252
    )Improved recovery
    
    
    (9,505
    )
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    (9,485
    )
    
    
    12
    
    
    
    
    
    
    
    44
    
    
    
    
    
    
    
    56Extensions and discoveries
    
    
    3,850
    
    
    
    8,762
    
    
    
    232
    
    
    
    
    
    
    
    12,844
    
    
    
    23,541
    
    
    
    13,787
    
    
    
    233
    
    
    
    
    
    
    
    37,561Years production
    
    
    (19,272
    )
    
    
    (24,553
    )
    
    
    (617
    )
    
    
    (261
    )
    
    
    (44,703
    )
    
    
    (83,393
    )
    
    
    (22,577
    )
    
    
    (1,225
    )
    
    
    
    
    
    
    (107,195
    )Reserves as of December 31,2005*
    
    
    138,180
    
    
    
    386,346
    
    
    
    5,653
    
    
    
    8,251
    
    
    
    538,430
    
    
    
    937,943
    
    
    
    379,809
    
    
    
    12,920
    
    
    
    
    
    
    
    1,330,672Increase (Decrease) originated in:Revisions of previous estimates
    
    
    (2,522
    )
    
    
    (257,027
    )
    
    
    (114
    )
    
    
    70,303
    
    
    
    (189,360
    )
    
    
    26,198
    
    
    
    (175,162
    )
    
    
    (934
    )
    
    
    79,120
    
    
    
    (70,778
    )Improved recovery
    
    
    (426
    )
    
    
    4,705
    
    
    
    464
    
    
    
    
    
    
    
    4,743
    
    
    
    156
    
    
    
    6,830
    
    
    
    568
    
    
    
    
    
    
    
    7,554Extensions and discoveries
    
    
    5,510
    
    
    
    6,900
    
    
    
    
    
    
    
    
    
    
    
    12,410
    
    
    
    63,595
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    63,595Sale of proved reserves in place
    
    
    (4,541
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,541
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Years production
    
    
    (19,124
    )
    
    
    (13,391
    )
    
    
    (671
    )
    
    
    (4,560
    )
    
    
    (37,746
    )
    
    
    (90,133
    )
    
    
    (18,155
    )
    
    
    (1,128
    )
    
    
    (1,802
    )
    
    
    (111,218
    )Reserves as of December 31,2006 (*)
    
    
    117,077
    
    
    
    127,533
    
    
    
    5,332
    
    
    
    73,994
    
    
    
    323,936
    
    
    
    937,759
    
    
    
    193,322
    
    
    
    11,426
    
    
    
    77,318
    
    
    
    1,219,825Increase (Decrease) originated in:Revisions of previous estimates
    
    
    (8,524
    )
    
    
    18,198
    
    
    
    (242
    )
    
    
    (8,818
    )
    
    
    614
    
    
    
    (4,104
    )
    
    
    86,034
    
    
    
    (1,244
    )
    
    
    (6,130
    )
    
    
    74,556Improved recovery
    
    
    
    
    
    
    8,864
    
    
    
    
    
    
    
    
    
    
    
    8,864
    
    
    
    
    
    
    
    2,027
    
    
    
    
    
    
    
    
    
    
    
    2,027Extensions and discoveries
    
    
    2,716
    
    
    
    299
    
    
    
    397
    
    
    
    
    
    
    
    3,412
    
    
    
    167,962
    
    
    
    
    
    
    
    364
    
    
    
    
    
    
    
    168,326Sale of proved reserves in place
    
    
    (1,231
    )
    
    
    (39,330
    )
    
    
    
    
    
    
    (109
    )
    
    
    (40,670
    )
    
    
    
    
    
    
    (41,245
    )
    
    
    
    
    
    
    (350
    )
    
    
    (41,595
    )Years production
    
    
    (16,353
    )
    
    
    (9,118
    )
    
    
    (693
    )
    
    
    (5,090
    )
    
    
    (31,254
    )
    
    
    (94,631
    )
    
    
    (16,406
    )
    
    
    (827
    )
    
    
    (4,212
    )
    
    
    (116,076
    )Reserves as of December 31,2007 (*)
    
    
    93,685
    
    
    
    106,446
    
    
    
    4,794
    
    
    
    59,977
    
    
    
    264,902
    
    
    
    1,006,986
    
    
    
    223,732
    
    
    
    9,719
    
    
    
    66,626
    
    
    
    1,307,063(*) Includes proved developed reserves:As of December 31, 2004
    
    
    114,654
    
    
    
    165,634
    
    
    
    3,999
    
    
    
    2,485
    
    
    
    286,773
    
    
    
    544,353
    
    
    
    208,436
    
    
    
    9,785
    
    
    
    
    
    
    
    762,574As of December 31, 2005
    
    
    93,980
    
    
    
    174,227
    
    
    
    4,113
    
    
    
    2,000
    
    
    
    274,320
    
    
    
    447,161
    
    
    
    203,255
    
    
    
    10,217
    
    
    
    
    
    
    
    660,633As of December 31, 2006
    
    
    77,826
    
    
    
    66,033
    
    
    
    4,019
    
    
    
    36,702
    
    
    
    184,580
    
    
    
    488,585
    
    
    
    136,771
    
    
    
    9,095
    
    
    
    43,113
    
    
    
    677,564As of December 31, 2007
    
    
    68,326
    
    
    
    46,098
    
    
    
    3,601
    
    
    
    33,432
    
    
    
    151,457
    
    
    
    499,270
    
    
    
    144,566
    
    
    
    7,870
    
    
    
    43,976
    
    
    
    695,682
 (1)
    
    Effect of the merger on December 31, 2004     F-90




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##### Table of Contents



Standardized measure of discounted future net cash flows
    F-91




---



##### Table of Contents



2007
    
    
    2006
    
    
    2005Rest of
    
    
    
    
    
    
    
    
    
    
    Rest of
    
    
    
    
    
    
    
    
    
    
    Rest ofLatin-
    
    
    
    
    
    
    
    
    
    
    Latin-
    
    
    
    
    
    
    
    
    
    
    Latin-Argentina
    
    
    America
    
    
    Total
    
    
    Argentina
    
    
    America
    
    
    Total
    
    
    Argentina
    
    
    America
    
    
    Total(in millions of pesos  note 2.c.)Consolidated companies:Future cash flows
    
    
    18,655
    
    
    
    21,327
    
    
    
    39,982
    
    
    
    17,264
    
    
    
    20,460
    
    
    
    37,724
    
    
    
    24,589
    
    
    
    41,868
    
    
    
    66,457Future production costs
    
    
    (6,550
    )
    
    
    (8,387
    )
    
    
    (14,937
    )
    
    
    (6,381
    )
    
    
    (6,954
    )
    
    
    (13,335
    )
    
    
    (6,020
    )
    
    
    (10,133
    )
    
    
    (16,153
    )Future development and
abandonment costs
    
    
    (2,199
    )
    
    
    (2,024
    )
    
    
    (4,223
    )
    
    
    (2,383
    )
    
    
    (2,230
    )
    
    
    (4,613
    )
    
    
    (2,030
    )
    
    
    (4,068
    )
    
    
    (6,098
    )Future income tax
    
    
    (2,875
    )
    
    
    (3,541
    )
    
    
    (6,416
    )
    
    
    (2,310
    )
    
    
    (3,644
    )
    
    
    (5,954
    )
    
    
    (5,298
    )
    
    
    (10,294
    )
    
    
    (15,592
    )Undiscounted future net cash flows
    
    
    7,031
    
    
    
    7,375
    
    
    
    14,406
    
    
    
    6,190
    
    
    
    7,632
    
    
    
    13,822
    
    
    
    11,241
    
    
    
    17,373
    
    
    
    28,61410% annual discount
    
    
    (2,344
    )
    
    
    (3,643
    )
    
    
    (5,987
    )
    
    
    (2,040
    )
    
    
    (3,497
    )
    
    
    (5,537
    )
    
    
    (4,006
    )
    
    
    (7,656
    )
    
    
    (11,662
    )Subtotal of consolidated
companies
    
    
    4,687
    
    
    
    3,732
    
    
    
    8,419
    
    
    
    4,150
    
    
    
    4,135
    
    
    
    8,285
    
    
    
    7,235
    
    
    
    9,717
    
    
    
    16,952Companys share in standardized
measure by unconsolidated
affiliates
    
    
    217
    
    
    
    2,492
    
    
    
    2,709
    
    
    
    194
    
    
    
    1,450
    
    
    
    1,644
    
    
    
    287
    
    
    
    183
    
    
    
    470Standardized measure of
discounted future net cash flows
    
    
    4,904
    
    
    
    6,224
    
    
    
    11,128
    
    
    
    4,344
    
    
    
    5,585
    
    
    
    9,929
    
    
    
    7,522
    
    
    
    9,900
    
    
    
    17,422
   F-92




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##### Table of Contents



Changes in the standardized measure of discounted future net cash flows
  CONSOLIDATED AND UNCONSOLIDATED COMPANIES2007
    
    
    2006
    
    
    2005Rest of
    
    
    
    
    
    
    
    
    
    
    Rest of
    
    
    
    
    
    
    
    
    
    
    Rest ofLatin-
    
    
    
    
    
    
    
    
    
    
    Latin-
    
    
    
    
    
    
    
    
    
    
    Latin-Argentina
    
    
    America
    
    
    Total
    
    
    Argentina
    
    
    America
    
    
    Total
    
    
    Argentina
    
    
    America
    
    
    Total(in millions of pesos  note 2.c.)Standardized measure at beginning of year
    
    
    4,344
    
    
    
    5,585
    
    
    
    9,929
    
    
    
    7,522
    
    
    
    9,900
    
    
    
    17,422
    
    
    
    5,789
    
    
    
    7,753
    
    
    
    13,542Changes related to oil & gas activities:Hydrocarbons sales net of production costs
    
    
    (1,526
    )
    
    
    (1,500
    )
    
    
    (3,026
    )
    
    
    (1,916
    )
    
    
    (1,563
    )
    
    
    (3,479
    )
    
    
    (1,548
    )
    
    
    (1,825
    )
    
    
    (3,373
    )Net change in sales prices, net of future production costs
    
    
    1,076
    
    
    
    2,655
    
    
    
    3,731
    
    
    
    (4,114
    )
    
    
    (488
    )
    
    
    (4,602
    )
    
    
    4,168
    
    
    
    4,985
    
    
    
    9,153Changes in future development costs
    
    
    (555
    )
    
    
    (937
    )
    
    
    (1,492
    )
    
    
    (756
    )
    
    
    (334
    )
    
    
    (1,090
    )
    
    
    (571
    )
    
    
    (879
    )
    
    
    (1,450
    )Extensions, discoveries and improved recovery, net of
future production and associated costs
    
    
    728
    
    
    
    12
    
    
    
    740
    
    
    
    326
    
    
    
    505
    
    
    
    831
    
    
    
    (518
    )
    
    
    282
    
    
    
    (236
    )Development costs incurred
    
    
    837
    
    
    
    819
    
    
    
    1,656
    
    
    
    674
    
    
    
    644
    
    
    
    1,318
    
    
    
    593
    
    
    
    838
    
    
    
    1,431Revisions of quantity estimates
    
    
    (301
    )
    
    
    2,365
    
    
    
    2,064
    
    
    
    (155
    )
    
    
    (750
    )
    
    
    (905
    )
    
    
    (579
    )
    
    
    486
    
    
    
    (93
    )Purchase of reserves in place
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Sale of reserves in place
    
    
    (51
    )
    
    
    (2,790
    )
    
    
    (2,841
    )
    
    
    (323
    )
    
    
    
    
    
    
    (323
    )
    
    
    
    
    
    
    
    
    
    
    Net change in income taxes
    
    
    (307
    )
    
    
    (636
    )
    
    
    (943
    )
    
    
    2,000
    
    
    
    3,132
    
    
    
    5,132
    
    
    
    (921
    )
    
    
    (2,944
    )
    
    
    (3,865
    )Accretion of discount
    
    
    626
    
    
    
    902
    
    
    
    1,528
    
    
    
    1,138
    
    
    
    1,636
    
    
    
    2,774
    
    
    
    868
    
    
    
    1,119
    
    
    
    1,987Changes in production rates
    
    
    8
    
    
    
    (82
    )
    
    
    (74
    )
    
    
    100
    
    
    
    178
    
    
    
    278
    
    
    
    31
    
    
    
    (218
    )
    
    
    (187
    )Effect of the ending of old contracts and the signing of
the new ones before tax (Bolivia and Venezuela)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,084
    )
    
    
    (7,084
    )
    
    
    
    
    
    
    Other changes
    
    
    25
    
    
    
    (169
    )
    
    
    (144
    )
    
    
    (152
    )
    
    
    (191
    )
    
    
    (343
    )
    
    
    210
    
    
    
    303
    
    
    
    513Standardized measure at end of year
    
    
    4,904
    
    
    
    6,224
    
    
    
    11,128
    
    
    
    4,344
    
    
    
    5,585
    
    
    
    9,929
    
    
    
    7,522
    
    
    
    9,900
    
    
    
    17,422
  25. Subsequent events
 a)
    
    Discovery of gas and condensate in Perú
  F-93




---



##### Table of Contents



b)
    
    Acquisition of Tierra Negra exploration block
  c)
    
    Law on Special Contribution on Extraordinary Prices of the International
Hydrocarbon Market in Venezuela
  d)
    
    Request for termination of the participation agreement relating to Block 18 in
Ecuador TLC
   e)
    
    Application of Law N° 42/2006 in Ecuador TLC
   f)
    
    Regular Shareholders Meeting held on March 28, 2008
   F-94




---



##### Table of Contents



g)
    
    Acquisition of interest in El Tordillo and La Tapera  Puesto Quiroga
  h)
    
    Approval of Global Program for the issuance of Corporate Notes
  26. Other consolidated information
  a)
    
    Property, plant and equipmentb)
    
    Equity in affiliatesc)
    
    Costs of salesd)
    
    Foreign currency assets and liabilitiese)
    
    Consolidated detail of expenses incurred and depreciationf)
    
    Information about ownership in subsidiaries and affiliatesg)
    
    Oil and gas areas and participation in joint venturesh)
    
    Combined joint ventures and consortium assets, liabilities and results
  F-95




---



##### Table of Contents



a)
    
    Property, plant and equipment as of December 31, 2007, 2006 and 2005
(Stated in millions of Argentina Pesos  See Note 2.c)
 2007Oil and Gas
    
    
    
    
    
    
    
    
    
    
    Gas and EnergyExploration
    
    
    Refining
    
    
    
    
    
    
    
    
    
    
    Marketing andand
    
    
    and
    
    
    
    
    
    
    
    
    
    
    Transportation
    
    
    Corporate andProduction
    
    
    Distribution
    
    
    Petrochemicals
    
    
    Electricity
    
    
    of Gas
    
    
    Eliminations
    
    
    TotalNet book value at the beginning of the year
    
    
    4,907
    
    
    
    1,123
    
    
    
    821
    
    
    
    1,806
    
    
    
    2,044
    
    
    
    137
    
    
    
    10,838Translation effect
    
    
    45
    
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54Net increase
    
    
    847
    
    
    
    250
    
    
    
    279
    
    
    
    224
    
    
    
    76
    
    
    
    17
    
    
    
    1,693Impairment of assets in Ecuador (Note 6)
    
    
    (759
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (759
    )Depreciation (Note 26.e)
    
    
    (782
    )
    
    
    (56
    )
    
    
    (100
    )
    
    
    (158
    )
    
    
    (95
    )
    
    
    (26
    )
    
    
    (1,217
    )Net book value at the end of the year
    
    
    4,258
    
    
    
    1,317
    
    
    
    1,009
    
    
    
    1,872
    
    
    
    2,025
    
    
    
    128
    
    
    
    10,609
 2006Oil and Gas
    
    
    
    
    
    
    
    
    
    
    Gas and EnergyExploration
    
    
    Refining
    
    
    
    
    
    
    
    
    
    
    Marketing andand
    
    
    and
    
    
    
    
    
    
    
    
    
    
    Transportation
    
    
    Corporate andProduction
    
    
    Distribution
    
    
    Petrochemical
    
    
    Electricity
    
    
    of Gas
    
    
    Eliminations
    
    
    TotalNet book value at the beginning of the year
    
    
    6,913
    
    
    
    947
    
    
    
    702
    
    
    
    1,863
    
    
    
    2,069
    
    
    
    163
    
    
    
    12,657Translation effect
    
    
    47
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52Net increase
    
    
    1,327
    
    
    
    238
    
    
    
    194
    
    
    
    82
    
    
    
    68
    
    
    
    1
    
    
    
    1,910Migration of operations in Venezuela (Note 6)
    
    
    (2,660
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,660
    )Depreciation (Note 26.e)
    
    
    (720
    )
    
    
    (62
    )
    
    
    (80
    )
    
    
    (139
    )
    
    
    (93
    )
    
    
    (27
    )
    
    
    (1,121
    )Net book value at the end of the year
    
    
    4,907
    
    
    
    1,123
    
    
    
    821
    
    
    
    1,806
    
    
    
    2,044
    
    
    
    137
    
    
    
    10,838
 2005Oil and Gas
    
    
    
    
    
    
    
    
    
    
    Gas and EnergyExploration
    
    
    Refining
    
    
    
    
    
    
    
    
    
    
    Marketing andand
    
    
    and
    
    
    
    
    
    
    
    
    
    
    Transportation
    
    
    Corporate andProduction
    
    
    Distribution
    
    
    Petrochemical
    
    
    Electricity
    
    
    of Gas
    
    
    Eliminations
    
    
    TotalNet book value at the beginning of the year
    
    
    6,624
    
    
    
    835
    
    
    
    670
    
    
    
    1,940
    
    
    
    2,087
    
    
    
    121
    
    
    
    12,277Translation effect
    
    
    62
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68Net increase
    
    
    1,302
    
    
    
    177
    
    
    
    95
    
    
    
    60
    
    
    
    72
    
    
    
    70
    
    
    
    1,776Impairment of assets in Venezuela (Note 6)
    
    
    (255
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (255
    )Depreciation (Note 26.e)
    
    
    (820
    )
    
    
    (65
    )
    
    
    (69
    )
    
    
    (137
    )
    
    
    (90
    )
    
    
    (28
    )
    
    
    (1,209
    )Net book value at the end of the year
    
    
    6,913
    
    
    
    947
    
    
    
    702
    
    
    
    1,863
    
    
    
    2,069
    
    
    
    163
    
    
    
    12,657
  F-96




---



##### Table of Contents



b)
    
    Equity in affiliates as of December 31, 2007 and 2006
  2007
    
    
    2006Description of securitiesFace
    
    
    
    
    
    
    
    
    
    Book
    
    
    BookName and issuer
    
    Value
    
    Amount
    
    
    Cost
    
    
    value
    
    
    valueCoroil S.A.
    
    Bs 1,000
    
    
    490
    
    
    
    48
    
    
    
    38
    
    
    
    48Petrobras Bolivia Refinación S.A.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    183Inversora Mata S.A.
    
    Bs 1,000
    
    
    490
    
    
    
    61
    
    
    
    90
    
    
    
    94Oleoducto de Crudos Pesados Ltd.
    
    US$0.01
    
    
    31,500
    
    
    
    98
    
    
    
    95
    
    
    
    96Oleoductos del Valle S.A.
    
    $10
    
    
    2,542,716
    
    
    
    61
    
    
    
    62
    
    
    
    64Petrolera Entre Lomas S.A.
    
    $1
    
    
    96,050
    
    
    
    2
    
    
    
    66
    
    
    
    68Refinería del Norte S.A.
    
    $10
    
    
    2,610,809
    
    
    
    63
    
    
    
    146
    
    
    
    123Cost related with CIESAs reestructuring (Note 9.II)
    
    
    
    
    
    
    
    
    
    
    
    
    110
    
    
    
    110TGS S.A. goodwill in CIESA S.A.
    
    
    
    
    
    
    
    
    
    
    
    
    23
    
    
    
    24Petroritupano S.A.
    
    Bs 1,000
    
    
    483,283
    
    
    
    1,109
    
    
    
    1,128
    
    
    
    1,127Petroven-Bras S.A.
    
    Bs 1,000
    
    
    97,163
    
    
    
    129
    
    
    
    130
    
    
    
    132Petrowayú S.A.
    
    Bs 1,000
    
    
    382,202
    
    
    
    957
    
    
    
    950
    
    
    
    984Petrokariña S.A.
    
    
    
    
    
    
    
    
    456
    
    
    
    466
    
    
    
    453Other
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    532,984
    
    
    
    3,306
    
    
    
    3,559
 Bs
    
    Millions of Venezuelan BolivaresUS$
    
    Millions of American Dollars  F-97




---



##### Table of Contents



c)
    
    Costs of sales for the years ended December 31, 2007, 2006 and 2005
  2007Gas and EnergyOil and Gas
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    MarketingExploration
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    andand
    
    
    Refining and
    
    
    
    
    
    
    
    
    
    
    Transportation
    
    
    Corporate andProduction
    
    
    Distribution
    
    
    Petrochemicals
    
    
    Electricity
    
    
    of Gas
    
    
    Eliminations
    
    
    TotalInventories at the beginning of the year
    
    
    159
    
    
    
    569
    
    
    
    318
    
    
    
    40
    
    
    
    7
    
    
    
    (124
    )
    
    
    969Translation effect
    
    
    2
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4Costs (Section e)
    
    
    2,338
    
    
    
    181
    
    
    
    269
    
    
    
    346
    
    
    
    208
    
    
    
    
    
    
    
    3,342Holding gain (losses)
    
    
    8
    
    
    
    29
    
    
    
    84
    
    
    
    (2
    )
    
    
    
    
    
    
    (33
    )
    
    
    86Purchases, consumption and other
    
    
    77
    
    
    
    5,815
    
    
    
    2,440
    
    
    
    680
    
    
    
    882
    
    
    
    (2,881
    )
    
    
    7,013Inventories at the end of the year
    
    
    (102
    )
    
    
    (850
    )
    
    
    (437
    )
    
    
    (44
    )
    
    
    (16
    )
    
    
    167
    
    
    
    (1,282
    )Costs of sales
    
    
    2,482
    
    
    
    5,744
    
    
    
    2,676
    
    
    
    1,020
    
    
    
    1,081
    
    
    
    (2,871
    )
    
    
    10,132
 2006Gas and EnergyOil and Gas
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    MarketingExploration
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    andand
    
    
    Refining and
    
    
    
    
    
    
    
    
    
    
    Transportation
    
    
    Corporate andProduction
    
    
    Distribution
    
    
    Petrochemicals
    
    
    Electricity
    
    
    of Gas
    
    
    Eliminations
    
    
    TotalInventories at the beginning of the year
    
    
    165
    
    
    
    527
    
    
    
    263
    
    
    
    42
    
    
    
    10
    
    
    
    (146
    )
    
    
    861Translation effect
    
    
    2
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3Costs (Section e)
    
    
    2,003
    
    
    
    181
    
    
    
    229
    
    
    
    271
    
    
    
    200
    
    
    
    
    
    
    
    2,884Holding gain (losses)
    
    
    (1
    )
    
    
    17
    
    
    
    18
    
    
    
    1
    
    
    
    (3
    )
    
    
    (7
    )
    
    
    25Purchases, consumption and other
    
    
    84
    
    
    
    4,535
    
    
    
    1,876
    
    
    
    585
    
    
    
    834
    
    
    
    (2,650
    )
    
    
    5,264Inventories at the end of the year
    
    
    (159
    )
    
    
    (569
    )
    
    
    (318
    )
    
    
    (40
    )
    
    
    (7
    )
    
    
    124
    
    
    
    (969
    )Costs of sales
    
    
    2,094
    
    
    
    4,692
    
    
    
    2,068
    
    
    
    859
    
    
    
    1,034
    
    
    
    (2,679
    )
    
    
    8,068
 2005Gas and EnergyOil and Gas
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Hydrocarbons
    
    
    Corporate,Exploration
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Marketing
    
    
    Other Discontinuedand
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    and
    
    
    Investments andProduction
    
    
    Refining
    
    
    Petrochemical
    
    
    Electricity
    
    
    Transportation
    
    
    Eliminations
    
    
    TotalInventories at the beginning of the year
    
    
    130
    
    
    
    331
    
    
    
    278
    
    
    
    33
    
    
    
    3
    
    
    
    (77
    )
    
    
    698Translation effect
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Costs (Section e)
    
    
    1,871
    
    
    
    147
    
    
    
    171
    
    
    
    275
    
    
    
    175
    
    
    
    
    
    
    
    2,639Holding gain (losses)
    
    
    (6
    )
    
    
    88
    
    
    
    (6
    )
    
    
    (10
    )
    
    
    
    
    
    
    (26
    )
    
    
    40Purchases, consumption and other
    
    
    135
    
    
    
    3,687
    
    
    
    1,522
    
    
    
    499
    
    
    
    666
    
    
    
    (2,175
    )
    
    
    4,334Inventories at the end of the year
    
    
    (165
    )
    
    
    (527
    )
    
    
    (263
    )
    
    
    (42
    )
    
    
    (10
    )
    
    
    146
    
    
    
    (861
    )Costs of sales
    
    
    1,966
    
    
    
    3,726
    
    
    
    1,702
    
    
    
    755
    
    
    
    834
    
    
    
    (2,132
    )
    
    
    6,851
  F-98




---



##### Table of Contents



d)
    
    Foreign currency assets and liabilities as of December 31, 2007 and 2006.
  Foreign currency and
    
    
    Exchange
    
    
    Book value inamount
    
    
    rate
    
    
    local currencyCURRENT ASSETSCash
    
    
    
    
    
    US$
    6
    
    
    
    3.1500
    
    
    
    18Rs
    1
    
    
    
    1.7962
    
    
    
    1BS
    3,413
    
    
    
    0.0015
    
    
    
    524Investments
    
    
    
    
    
    US$
    283
    
    
    
    3.1500
    
    
    
    890Rs
    33
    
    
    
    1.7962
    
    
    
    60950Trade receivables
    
    
    
    
    
    US$
    207
    
    
    
    3.1500
    
    
    
    652Rs
    81
    
    
    
    1.7962
    
    
    
    146798Other receivables
    
    
    
    
    
    US$
    548
    
    
    
    3.1500
    
    
    
    1,727Rs

    11
    
    
    
    1.7962
    
    
    
    201,747TOTAL 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,519TOTAL 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,642NON-CURRENT ASSETSTrade receivables
    
    
    
    
    
    US$
    3
    
    
    
    3.1500
    
    
    
    8Other receivables
    
    
    
    
    
    US$
    8
    
    
    
    3.1500
    
    
    
    26Rs
    46
    
    
    
    1.7962
    
    
    
    83109Investments
    
    
    
    
    
    US$
    43
    
    
    
    3.1500
    
    
    
    137TOTAL 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    254TOTAL 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    356TOTAL ASSETS
    
    
    
    
    
    
    2007
    
    
    
    
    
    
    
    3,7732006
    
    
    
    
    
    
    
    2,998
 Foreign currency and
    
    
    Exchange
    
    
    Book value inamount
    
    
    rate
    
    
    local currencyCURRENT LIABILITIESAccounts payable
    
    
    
    
    
    US$
    341
    
    
    
    3.1500
    
    
    
    1,074Rs
    28
    
    
    
    1.7962
    
    
    
    50BS
    13,652
    
    
    
    0.0015
    
    
    
    20Sol
    1
    
    
    
    1.0510
    
    
    
    11,145Short-term debt
    
    
    
    
    
    US$
    545
    
    
    
    3.1500
    
    
    
    1,717Rs
    43
    
    
    
    1.7962
    
    
    
    771,794Payroll and social
    
    
    
    Sol
    2
    
    
    
    1.0510
    
    
    
    2security taxes
    
    
    
    Rs
    7
    
    
    
    1.7962
    
    
    
    13US$
    5
    
    
    
    3.1500
    
    
    
    1530Taxes payable
    
    
    
    
    
    US$
    17
    
    
    
    3.1500
    
    
    
    55Rs

    36
    
    
    
    1.7962
    
    
    
    64119Other liabilities
    
    
    
    Rs

    3
    
    
    
    1.7962
    
    
    
    6US$
    43
    
    
    
    3.1500
    
    
    
    135141TOTAL 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,229TOTAL 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,628NON-CURRENT LIABILITIESAccounts payable
    
    
    
    
    
    US$
    4
    
    
    
    3.1500
    
    
    
    14Long-term debt
    
    
    
    
    
    US$
    1,698
    
    
    
    3.1500
    
    
    
    5,350Taxes payable
    
    
    
    
    
    US$
    54
    
    
    
    3.1500
    
    
    
    171Rs
    42
    
    
    
    1.7962
    
    
    
    75246Other liabilities
    
    
    
    
    
    US$
    91
    
    
    
    3.1500
    
    
    
    286Rs
    1
    
    
    
    1.7962
    
    
    
    2288TOTAL 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,898TOTAL 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,042TOTAL LIABILITIES
    
    
    
    
    
    
    2007
    
    
    
    
    
    
    
    9,1272006
    
    
    
    
    
    
    
    8,670
 US$
    
    Millions of American DollarsBS
    
    Millions of BolivaresRs
    
    Millions of RealesSol
    
    Millions of Peruvian Soles F-99




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##### Table of Contents



e)
    
    Consolidated detail of expenses for the years ended December 31, 2007, 2006 and 2005
  2005
    
    
    2006
    
    
    2007Administrativeand selling
    
    
    ExplorationAccounts
    
    Total
    
    
    Total
    
    
    Total
    
    
    Costs
    
    
    expenses
    
    
    expensesSalaries and wages
    
    
    435
    
    
    
    531
    
    
    
    610
    
    
    
    271
    
    
    
    338
    
    
    
    1Social security taxes
    
    
    72
    
    
    
    96
    
    
    
    109
    
    
    
    46
    
    
    
    63
    
    
    
    Other benefits to personnel
    
    
    128
    
    
    
    166
    
    
    
    182
    
    
    
    59
    
    
    
    123
    
    
    
    Taxes, charges and contributions
    
    
    209
    
    
    
    209
    
    
    
    259
    
    
    
    16
    
    
    
    242
    
    
    
    1Fees and professional advisory
    
    
    100
    
    
    
    110
    
    
    
    113
    
    
    
    31
    
    
    
    81
    
    
    
    1Depreciation of property, plant and equipment (Note 26.a)
    
    
    1,209
    
    
    
    1,121
    
    
    
    1,217
    
    
    
    1,117
    
    
    
    100
    
    
    
    Amortization of other assets
    
    
    14
    
    
    
    8
    
    
    
    8
    
    
    
    1
    
    
    
    7
    
    
    
    Oil and gas royalties
    
    
    507
    
    
    
    716
    
    
    
    920
    
    
    
    920
    
    
    
    
    
    
    
    Spares and repairs
    
    
    129
    
    
    
    158
    
    
    
    161
    
    
    
    151
    
    
    
    10
    
    
    
    Geological and geophysical expenses
    
    
    34
    
    
    
    32
    
    
    
    103
    
    
    
    
    
    
    
    
    
    
    
    103Abandoned and non-productive well write-downs
    
    
    16
    
    
    
    78
    
    
    
    45
    
    
    
    
    
    
    
    
    
    
    
    45Transportation and freights
    
    
    293
    
    
    
    332
    
    
    
    372
    
    
    
    53
    
    
    
    319
    
    
    
    Construction contracts and other services
    
    
    466
    
    
    
    520
    
    
    
    604
    
    
    
    450
    
    
    
    154
    
    
    
    Fuel, gas, energy and other
    
    
    68
    
    
    
    71
    
    
    
    93
    
    
    
    83
    
    
    
    10
    
    
    
    Other operating costs and consumptions
    
    
    236
    
    
    
    228
    
    
    
    261
    
    
    
    149
    
    
    
    91
    
    
    
    21Expense reimbursements
    
    
    (107
    )
    
    
    (98
    )
    
    
    (99
    )
    
    
    (5
    )
    
    
    (94
    )
    
    
    Total 2007
    
    
    
    
    
    
    
    
    
    
    4,958
    
    
    
    3,342
    
    
    
    1,444
    
    
    
    172Total 2006
    
    
    
    
    
    
    4,278
    
    
    
    
    
    
    
    2,884
    
    
    
    1,277
    
    
    
    117Total 2005
    
    
    3,809
    
    
    
    
    
    
    
    
    
    
    
    2,639
    
    
    
    1,136
    
    
    
    34
  F-100




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##### Table of Contents



f)
    
    Information about ownership in subsidiaries and affiliates as of December 31, 2007
 % OF OWNERSHIP AND VOTESDIRECT
    
    
    INDIRECT
    
    
    BUSINESS SEGMENTSubsidiariesCorod Producción S.A. (Venezuela)
    
    
    
    
    
    
    75.82
    
    
    Oil and Gas Exploration and ProductionEcuadortlc S.A. (Ecuador)
    
    
    
    
    
    
    75.82
    
    
    Oil and Gas Exploration and ProductionEnecor S.A.
    
    
    
    
    
    
    53.07
    
    
    Gas and EnergyEG3 Asfaltos S.A.
    
    
    
    
    
    
    75.82
    
    
    Refining and DistributionEG3 Red S.A.
    
    
    
    
    
    
    75.82
    
    
    Refining and DistributionInnova S.A. (Brazil)
    
    
    
    
    
    
    75.82
    
    
    PetrochemicalsPetrobras Energía de México S.A. de C.V. (México)
    
    
    
    
    
    
    75.82
    
    
    Oil and Gas Exploration and ProductionPetrobras Finance Bermuda (Bermudas)
    
    
    
    
    
    
    75.82
    
    
    CorporatePetrobras Holding Austria AG (Austria)
    
    
    
    
    
    
    75.82
    
    
    CorporatePetrobras Energía S.A.
    
    
    75.82
    
    
    
    
    
    
    CorporatePetrobras Energía Internacional S.A.
    
    
    
    
    
    
    75.82
    
    
    CorporatePetrobras Energía Operaciones S.A. (Ecuador)
    
    
    
    
    
    
    75.82
    
    
    Oil and Gas Exploration and ProductionPetrobras Electricidad de Argentina S.A.
    
    
    
    
    
    
    75.82
    
    
    Gas and EnergyPetrobras Financial Services Austria GMBH (Austria)
    
    
    
    
    
    
    75.82
    
    
    CorporatePetrobras Hispano Argentina S.A. (Spain)
    
    
    
    
    
    
    75.82
    
    
    CorporatePetrobras Bolivia Internacional S.A. (Bolivia)
    
    
    
    
    
    
    75.82
    
    
    CorporatePetrobras Energía Ecuador (Grand Cayman)
    
    
    
    
    
    
    75.82
    
    
    Oil and Gas Exploration and ProductionPetrolera San Carlos S.A. (Venezuela)
    
    
    
    
    
    
    75.82
    
    
    Oil and Gas Exploration and ProductionTransporte y Servicios de Gas en Uruguay S.A. (Uruguay)
    
    
    
    
    
    
    48.94
    
    
    Gas and EnergyWorld Energy Business S.A.
    
    
    
    
    
    
    75.82
    
    
    Gas and EnergyElectricidade Com S.A. (Brazil)
    
    
    
    
    
    
    75.82
    
    
    Gas and EnergyPetrobras Energía Colombia (Grand Cayman)
    
    
    
    
    
    
    75.82
    
    
    Oil and Gas Exploration and ProductionWorld Fund Financial Services (Grand Cayman)
    
    
    
    
    
    
    75.82
    
    
    CorporateMain affiliates  join controlCía. de Inversiones de Energía S.A.
    
    
    
    
    
    
    37.91
    
    
    Gas and EnergyDistrilec Inversora S.A.
    
    
    
    
    
    
    36.77
    
    
    Gas and EnergyEdesur S.A.
    
    
    
    
    
    
    20.72
    
    
    Gas and EnergyTransportadora de Gas del Sur S.A.
    
    
    
    
    
    
    20.96
    
    
    Gas and EnergyPetrobras de Valores Internacional de España S.L. (Spain)
    
    
    
    
    
    
    45.49
    
    
    CorporatePetrobras Energía Perú S.A. (Perú)
    
    
    
    
    
    
    45.55
    
    
    Oil and Gas Exploration and ProductionPetrobras Energía Venezuela S.A. (Venezuela)
    
    
    
    
    
    
    45.55
    
    
    Oil and Gas Exploration and ProductionMain affiliates  significant influenceCoroil S.A. (Venezuela)
    
    
    
    
    
    
    28.36
    
    
    Oil and Gas Exploration and ProductionOleoducto de Crudos Pesados Ltd. (Grand Cayman)
    
    
    
    
    
    
    8.66
    
    
    Oil and Gas Exploration and ProductionOleoducto de Crudos Pesados S.A. (Ecuador)
    
    
    
    
    
    
    8.66
    
    
    Oil and Gas Exploration and ProductionInversora Mata S.A. (Venezuela)
    
    
    
    
    
    
    37.15
    
    
    Oil and Gas Exploration and ProductionOleoductos del Valle S.A.
    
    
    
    
    
    
    17.51
    
    
    Oil and Gas Exploration and ProductionPropyme S.G.R
    
    
    
    
    
    
    37.91
    
    
    CorporatePetrolera Entre Lomas S.A.
    
    
    
    
    
    
    14.56
    
    
    Oil and Gas Exploration and ProductionRefinería del Norte S.A.
    
    
    
    
    
    
    21.61
    
    
    Refining and DistributionUrugua-í S.A.
    
    
    
    
    
    
    22.24
    
    
    Gas and EnergyPetroven-Bras S.A.
    
    
    
    
    
    
    25.20
    
    
    Oil and Gas Exploration and ProductionPetrokariña S.A.
    
    
    
    
    
    
    26.15
    
    
    Oil and Gas Exploration and ProductionPetrowayú S.A.
    
    
    
    
    
    
    27.30
    
    
    Oil and Gas Exploration and ProductionPetroritupano S.A.
    
    
    
    
    
    
    16.68
    
    
    Oil and Gas Exploration and ProductionOther subsidiariesTernoeléctrica José de San Martín S.A.
    
    
    
    
    
    
    6.07
    
    
    Gas and EnergyTernoeléctrica Manuel Belgrano S.A.
    
    
    
    
    
    
    6.07
    
    
    Gas and Energy
  F-101




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##### Table of Contents



g)
    
    Oil and gas areas and participation in joint-ventures as of December 31, 2007
 WORKING
    
    
    
    
    DURATIONNAME
    
    LOCATION
    
    INTEREST (2)
    
    
    OPERATOR
    
    THROUGHProductionArgentina25 de Mayo  Medanito S.E.
    
    La Pampa and Río Negro
    
    
    100.00
    %
    
    Petrobras Energía
    
    2016Jagüel de los Machos
    
    La Pampa and Río Negro
    
    
    100.00
    %
    
    Petrobras Energía
    
    2015Puesto Hernández
    
    Mendoza and Neuquén
    
    
    38.45
    %
    
    Petrobras Energía
    
    2016Bajada del Palo  La Amarga Chica
    
    Neuquén
    
    
    17.90
    %
    
    Petrolera Entre Lomas
    
    2015Santa Cruz II
    
    Santa Cruz
    
    
    100.00
    %
    
    Petrobras Energía
    
    2017 / 2024Río Neuquén
    
    Neuquén and Río Negro
    
    
    100.00
    %
    
    Petrobras Energía
    
    2017Entre Lomas
    
    Neuquén and Río Negro
    
    
    17.90
    %
    
    Petrolera Entre Lomas
    
    2016Aguada de la Arena
    
    Neuquén
    
    
    80.00
    %
    
    Petrobras Energía
    
    2022Veta Escondida y Rincón de Aranda
    
    Neuquén
    
    
    55.00
    %
    
    Petrobras Energía
    
    2016Santa Cruz I
    
    Santa Cruz
    
    
    71.00
    %
    
    Petrobras Energía
    
    2016 / 2023Sierra Chata (7)
    
    Neuquén
    
    
    19.89
    %
    
    Petrobras Energía
    
    2022El Mangrullo
    
    Neuquén
    
    
    100.00
    %
    
    Petrobras Energía
    
    2025Atuel Norte
    
    Mendoza
    
    
    33.33
    %
    
    Tecpetrol
    
    2016La Tapera  Puesto Quiroga (7)
    
    Chubut
    
    
    21.95
    %
    
    Tecpetrol
    
    2016El Tordillo (7)
    
    Chubut
    
    
    21.95
    %
    
    Tecpetrol
    
    2016Aguaragüe
    
    Salta
    
    
    15.00
    %
    
    Tecpetrol
    
    2017Agua Fresca
    
    Santa Cruz
    
    
    50.00
    %
    
    Petrobras Energía
    
    (1)Gobernardor Ayala
    
    La Pampa
    
    
    22.51
    %
    
    Petro Andina Resources Ltd
    
    (1)ForeignColpa  Caranda
    
    Bolivia
    
    
    100.00
    %
    
    Petrobras Energía
    
    2029Oritupano  Leona (5)
    
    Venezuela
    
    
    22.00
    %
    
    PDVSA
    
    2025Acema (5)
    
    Venezuela
    
    
    33.24
    %
    
    PDVSA
    
    2025La Concepción (5)
    
    Venezuela
    
    
    36.00
    %
    
    PDVSA
    
    2025Mata (5)
    
    Venezuela
    
    
    34.49
    %
    
    PDVSA
    
    2025Lote X
    
    Perú
    
    
    60.08
    %
    
    Petrobras Energía Perú
    
    2024Block 18 (4)
    
    Ecuador
    
    
    70.00
    %
    
    Ecuadortlc
    
    2022Block 31 (4)
    
    Ecuador
    
    
    100.00
    %
    
    Petrobras Energía Ecuador
    
    2024Tibu
    
    Colombia
    
    
    30.00
    %
    
    Ecopetrol
    
    ExplorationArgentinaGlencross
    
    Santa Cruz
    
    
    87.00
    %
    
    Petrobras Energía
    
    2032Puesto Oliverio
    
    Santa Cruz
    
    
    50.00
    %
    
    Petrobras Energía
    
    (1)Cerrito Oeste
    
    Santa Cruz
    
    
    50.00
    %
    
    Petrobras Energía
    
    (1)El Campamento
    
    Santa Cruz
    
    
    50.00
    %
    
    Petrobras Energía
    
    (1)Cerro Hamaca
    
    Mendoza
    
    
    39.64
    %
    
    Petro Andina Resources Ltd
    
    (1)Cañadón del Puma
    
    Neuquén
    
    
    50.00
    %
    
    Chevron San Jorge
    
    2008Parva Negra (7)
    
    Neuquén
    
    
    47.63
    %
    
    Petrobras Energía
    
    (1)Cerro Manrique (3)
    
    Rio Negro
    
    
    50.00
    %
    
    Petrobras Energía
    
    Estancia Chiripá
    
    Santa Cruz
    
    
    87.00
    %
    
    Petrobras Energía
    
    2032Enarsa 1 (E1)
    
    Argentine continental shelf
    
    
    25.00
    %
    
    YPF
    
    2023Enarsa 3 (E3)
    
    Argentine continental shelf
    
    
    35.00
    %
    
    Petrobras Energía
    
    2023Chirete
    
    Salta
    
    
    100.00
    %
    
    Petrobras Energía
    
    2010Hickmann
    
    Salta
    
    
    50.00
    %
    
    Tecpetrol
    
    2011Rio Colorado
    
    Salta
    
    
    30.00
    %
    
    Tecpetrol
    
    2010ForeignBlock 57 (6)
    
    Perú
    
    
    21.12
    %
    
    Petrobras Energía Perú
    
    2011Block 58
    
    Perú
    
    
    60.08
    %
    
    Petrobras Energía Perú
    
    2012Block 103
    
    Perú
    
    
    18.02
    %
    
    Petrobras Energía Perú
    
    2013Block 110
    
    Perú
    
    
    60.08
    %
    
    Petrobras Energía Perú
    
    2013Block 117
    
    Perú
    
    
    60.08
    %
    
    Petrobras Energía Perú
    
    2013
 (1)
    
    The granting of the concession is under progress and the term will be 25 years from such
granting.(2)
    
    Indirect interest through Petrobras Enegia and its subsidiaries.(3)
    
    The granting of the exploration concession is not yet obtained.(4)
    
    See Note 6  Operations in Ecuador.(5)
    
    See Note 6  Operations in Venezuela.(6)
    
    In 2007 the Company acquired an additional 11.01% interest in the block. The granting required
to establish the Companys share in the block is still pending.(7)
    
    See Note 6  Changes in Oil and gas areas and participation in joint ventures in Argentina.  F-102




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##### Table of Contents



h)
    
    Combined joint-ventures and consortium assets and liabilities as of December 31, 2007 and 2006
and results for the fiscal years ended December 31, 2007, 2006 and 2005.
  Assets and liabilities
    
    2007
    
    
    2006Current assets
    
    
    935
    
    
    
    647Non-current assets
    
    
    1,415
    
    
    
    1,656Total assets
    
    
    2,350
    
    
    
    2,303Current liabilities
    
    
    538
    
    
    
    724Non-current liabilities
    
    
    74
    
    
    
    65Total liabilities
    
    
    612
    
    
    
    789
 Statement of income  For the fiscal years ended December 31, 2007, 2006 and 2005
 2007
    
    
    2006
    
    
    2005Net sales
    
    
    1,719
    
    
    
    1,686
    
    
    
    2,105Costs of sales
    
    
    (895
    )
    
    
    (634
    )
    
    
    (878
    )Gross profit
    
    
    824
    
    
    
    1,052
    
    
    
    1,227Administrative and selling expenses
    
    
    (67
    )
    
    
    (102
    )
    
    
    (92
    )Exploration expenses
    
    
    (49
    )
    
    
    (42
    )
    
    
    (20
    )Other operating expenses
    
    
    (226
    )
    
    
    (93
    )
    
    
    (219
    )Financial expenses and holding losses
    
    
    (22
    )
    
    
    (49
    )
    
    
    (160
    )Other expenses net
    
    
    (569
    )
    
    
    
    
    
    
    Income tax provision
    
    
    (130
    )
    
    
    (146
    )
    
    
    (98
    )Net (loss) income
    
    
    (239
    )
    
    
    620
    
    
    
    638
  F-103




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##### Table of Contents



REFINERÍA DEL NORTE S.A.
 
 STATEMENTS OF INCOME
 FOR THE FISCAL YEARS ENDED DECEMBER 31, 2007 AND 2006
  Unaudited2007
    
    
    2006NET SALES (Note 3.i)
    
    
    1,485,456
    
    
    
    1,516,420COST OF SALES (Note 3.j)
    
    
    (1,074,513
    )
    
    
    (1,180,701
    )Gross profit
    
    
    410,943
    
    
    
    335,719ADMINISTRATIVE EXPENSES (Exhibit II)
    
    
    (51,193
    )
    
    
    (43,294
    )SELLING EXPENSES (Exhibit II)
    
    
    (100,301
    )
    
    
    (90,380
    )OTHER EXPENSES
    
    
    (10,924
    )
    
    
    (5,884
    )FINANCIAL INCOME (EXPENSES) AND HOLDING GAINS
(LOSSES) (Note 3.k)
    
    
    18,391
    
    
    
    (16,494
    )OTHER INCOME (EXPENSES), NET (Note 3.l)
    
    
    1,301
    
    
    
    (35,523
    )Income before income tax
    
    
    268,217
    
    
    
    144,144INCOME TAX (Note 3.m)
    
    
    (100,342
    )
    
    
    (54,952
    )Net income for the year
    
    
    167,875
    
    
    
    89,192
   F-104




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##### Table of Contents



REFINERÍA DEL NORTE S.A.
 
 BALANCE SHEETS AS OF DECEMBER 31, 2007 AND 2006
  Unaudited2007
    
    
    2006ASSETSCURRENT ASSETSCash
    
    
    3,498
    
    
    
    6,044Investments (Note 3.a)
    
    
    85,643
    
    
    
    47,005Trade receivables (Note 3.b)
    
    
    125,248
    
    
    
    118,680Other receivables (Note 3.c)
    
    
    153,100
    
    
    
    153,202Inventories (Note 3.d)
    
    
    185,791
    
    
    
    112,238Total current assets
    
    
    553,280
    
    
    
    437,169NON-CURRENT ASSETSTrade receivables
    
    
    2,508
    
    
    
    2,564Other receivables (Note 3.c)
    
    
    1,476
    
    
    
    17,993Materials and spare parts
    
    
    17,628
    
    
    
    18,537Investments
    
    
    3
    
    
    
    3Property, plant and equipment (Exhibit I)
    
    
    397,653
    
    
    
    400,752Intangible assets
    
    
    2,348
    
    
    
    3,229Total non-current assets
    
    
    421,616
    
    
    
    443,078Total assets
    
    
    974,896
    
    
    
    880,247LIABILITIESCURRENT LIABILITIESAccounts payable (Note 3.e)
    
    
    272,240
    
    
    
    253,474Loans (Note 3.f)
    
    
    88,140
    
    
    
    79,848Payroll and social security taxes
    
    
    7,517
    
    
    
    6,188Taxes payable (Note 3.g)
    
    
    45,826
    
    
    
    3,456Other liabilities (Note 3.h)
    
    
    
    
    
    
    29,369Advances from customers
    
    
    1,820
    
    
    
    5,210Dividends payable
    
    
    
    
    
    
    35,605Total current liabilities
    
    
    415,543
    
    
    
    413,150NON-CURRENT LIABILITIESOther liabilities (Note 3.h)
    
    
    9,479
    
    
    
    9,002Total non-current liabilities
    
    
    9,479
    
    
    
    9,002Total liabilities
    
    
    425,022
    
    
    
    422,152SHAREHOLDERS EQUITY(as per related statements)
    
    
    549,874
    
    
    
    458,095974,896
    
    
    
    880,247
   F-105




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##### Table of Contents



REFINERÍA DEL NORTE S.A.
 
 STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
 FOR THE FISCAL YEARS ENDED DECEMBER 31, 2007 AND 2006
  Unaudited2007
    
    
    2006Shareholderscontributions
    
    
    Retained earningsAdjustment
    
    
    
    
    
    
    
    
    
    
    InappropriateCapital
    
    
    to capital
    
    
    Legal
    
    
    Voluntary
    
    
    retainedstock
    
    
    stock
    
    
    reserve
    
    
    reserve
    
    
    earnings
    
    
    Total
    
    
    TotalBalances at beginning of the year
    
    
    91,607
    
    
    
    130,190
    
    
    
    30,483
    
    
    
    116,623
    
    
    
    89,192
    
    
    
    458,095
    
    
    
    404,508Decisions of the Regular
Shareholders Meetings of April
14, 2006, March 15, 2007, and December 26, 2007:- Earnings distribution:to cash dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (44,596
    )
    
    
    (44,596
    )
    
    
    (35,605
    )to legal reserve
    
    
    
    
    
    
    
    
    
    
    4,460
    
    
    
    
    
    
    
    (4,460
    )
    
    
    
    
    
    
    to voluntary reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,136
    
    
    
    (40,136
    )
    
    
    
    
    
    
    - Reversal of the voluntary
reserve for payment of
dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (31,500
    )
    
    
    
    
    
    
    (31,500
    )
    
    
    Net income for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    167,875
    
    
    
    167,875
    
    
    
    89,192Balances at end of the year
    
    
    91,607
    
    
    
    130,190
    
    
    
    34,943
    
    
    
    125,259
    
    
    
    167,875
    
    
    
    549,874
    
    
    
    458,095
   F-106




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##### Table of Contents



REFINERÍA DEL NORTE S.A.
 
 STATEMENTS OF CASH FLOWS (1)
 FOR THE FISCAL YEARS ENDED DECEMBER 31, 2007 AND 2006
  Unaudited2007
    
    
    2006Cash provided by operations:Net income for the year
    
    
    167,875
    
    
    
    89,192Adjustments to reconcile the net income for the year
to the cash provided by operations:Income tax accrued
    
    
    100,342
    
    
    
    54,952Income tax paid
    
    
    (39,659
    )
    
    
    (85,498
    )Depreciation of property, plant and equipment
    
    
    41,053
    
    
    
    37,641Agreement with Saltas tax authorities
    
    
    
    
    
    
    29,369Interest accrued
    
    
    4,055
    
    
    
    4,053Interest paid
    
    
    (4,459
    )
    
    
    (4,208
    )Inventory holding (gains) losses
    
    
    (24,032
    )
    
    
    9,757Consumption of materials and spare parts
    
    
    8,381
    
    
    
    7,372Property, plant and equipment retirements
    
    
    1,984
    
    
    
    Intangible assets amortization
    
    
    842
    
    
    
    842Reestimation of provisions and reserves
    
    
    879
    
    
    
    (3,374
    )Other
    
    
    337
    
    
    
    892Changes in assets and liabilitiesTrade receivables
    
    
    (7,310
    )
    
    
    56,496Other receivables
    
    
    16,619
    
    
    
    (95,336
    )Inventories and materials and spare parts
    
    
    (56,993
    )
    
    
    (24,293
    )Accounts payable
    
    
    18,766
    
    
    
    33,780Payroll and social security taxes and taxes payable
    
    
    (16,984
    )
    
    
    2,263Advances from customers
    
    
    (3,390
    )
    
    
    Other liabilities
    
    
    (28,892
    )
    
    
    548Cash provided by operations
    
    
    179,414
    
    
    
    114,448Cash used in investing activities:Acquisition of property, plant and equipment
    
    
    (40,252
    )
    
    
    (67,279
    )Sale of property, plant and equipment
    
    
    314
    
    
    
    (155
    )Increase in intangible assets
    
    
    (63
    )
    
    
    (1,679
    )Cash used in investing activities
    
    
    (40,001
    )
    
    
    (69,113
    )Cash (used in) provided by financing activities:Net short-term loans obtained
    
    
    8,380
    
    
    
    969Dividends paid
    
    
    (111,701
    )
    
    
    Cash (used in) provided by financing activities
    
    
    (103,321
    )
    
    
    969Increase (decrease) in cash
    
    
    36,092
    
    
    
    46,304Cash and cash equivalents at beginning of the year (1)
    
    
    53,049
    
    
    
    6,745Cash and cash equivalents at end of the year (1)
    
    
    89,141
    
    
    
    53,049
 (1)
    
    Cash plus current investments with original maturities of three months or less.   F-107




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##### Table of Contents



REFINERÍA DEL NORTE S.A.
 
 NOTES TO THE FINANCIAL STATEMENTS
 AS OF DECEMBER 31, 2007
  1. COMPANY INCORPORATION AND ACTIVITY
   2. SIGNIFICANT ACCOUNTING POLICIES
 I. Generally accepted accounting principles
        F-108




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##### Table of Contents



II. Restatement into constant currency
   III. Valuation methods
  a)
    
    Cash and investments:
 
    
    Cash and certificates of deposit in local currency: at nominal value.
    
    Cash and certificates of deposit in foreign currency: at nominal value,
converted at the prevailing exchange rates at each year-end. Foreign exchange
differences were charged to the statement of income for each year.
    
    Mutual funds: at market prices as of each year-end.The certificates of deposit and mutual funds include financial income (expense)
accrued as of each year end.
    
    Non-current investment in subsidiary: it includes the 100% interest in
the capital stock of Refinor Internacional S.A., a company organized in Bolivia, by
the holding of 6 registered shares of common stock, face value USD 166 per share.
This company closes its fiscal year on December 31 and it has not been engaged in
any transactions since its acquisition by Refinor in October, 2005. As of December
31, 2007, its shareholders equity amounted to 3. This investment was valued by the
equity method using Management information available as of year-end.The Companys Management decided not to file consolidated financial statements
considering the scarce significance of the amounts involved.
 b)
    
    Trade receivables, accounts payable and advances from customers:Trade receivables and accounts payable were valued at the estimated price used in spot
transactions upon each transaction plus the relevant portion of accrued financial income
(expense).Receivables and payables in foreign currency were converted into Argentine pesos at the
prevailing exchange rates at each year-end for the settlement of these transactions.Trade receivables were valued net of an allowance for doubtful accounts. Upon estimating
the amounts the Companys Management considered the likelihood of occurrence based on the
judgment elements available and the legal counsels opinion.Advances from customers were valued considering the amounts of money received.
 c)
    
    Loans:Loans were valued according to the amount of money received, including the relevant
portion of financial expense accrued.Payables in foreign currency were converted into Argentine pesos at the prevailing
exchange rates at each year-end for the settlement of these transactions.
  F-109




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##### Table of Contents



d)
    
    Other receivables and payables (except contingencies):Receivables from and payables to third parties, except for those indicated in sections
(b) and (c) above, were valued on the basis of the amount to be collected and paid,
respectively, discounted in the relevant cases. Receivables from and payables to related companies were valued at nominal value plus
accrued financial income (expense). Deferred tax balances were valued at nominal value.Receivables and payables in foreign currency were converted into Argentine pesos at the
prevailing exchange rates at each year-end for the settlement of these transactions.e)
    
    Inventories:Crude oil and refined products: at replacement or reproduction cost, as applicable.Materials and spare parts: at their replacement cost, net of an allowance for impairment
in value in those cases in which there is evidence of obsolescence or overvaluation.Advances to suppliers: valued on the basis of the amounts of money delivered. The amounts
in foreign currency were converted at the prevailing exchange rates at each year end for
the settlement of these transactions.The value of inventories, thus obtained, does not exceed its recoverable value.f)
    
    Property, plant and equipment:Transferred assets: The total value was assessed on the basis of the price effectively
paid for the majority shareholding under competitive bidding (70% of capital stock),
restated as indicated in note 2.II. Such value was pro-rated among the different assets
obtained on the basis of the technical residual value thereof estimated by independent
experts. The amounts thus assessed are net of the related accumulated depreciation
calculated by the straight-line method on the basis of the remaining useful life
estimated by the experts mentioned above.Additions subsequent to the transfer date were valued at acquisition cost restated as
indicated in note 2.II including, if applicable, the cost related to the financing
thereof less the related accumulated depreciation calculated by the straight-line method
on the basis of the estimated useful life.The valuation of property, plant and equipment does not exceed the related recoverable
value.g)
    
    Intangible assets:Related to disbursements made to gas stations owners in connection with agreements of
branding of gas stations. They were valued on the basis of the amount of money delivered
restated as mentioned in note 2.II less the related accumulated amortization, calculated
considering a five-year useful life, which is the term of the agreements.The valuation of intangible assets does not exceed the related recoverable value.h)
    
    Income tax, minimum presumed income tax and VAT:The Company recognized the income tax charge based on the deferred tax method, thus
recognizing the temporary differences between the book- and tax-purposes measurements of
assets and liabilities. The tax rate expected to be effective upon the reversal or use of
deferred assets and liabilities was applied on the temporary differences identified in
order to determine such assets and liabilities, considering current legal regulations
issued as of the date of issuance of these financial statements.As of December 31, 2007 and 2006, the Company recognized deferred tax assets since the
future recoverability thereof has been evaluated as probable.In addition, the Company determines minimum presumed income tax by applying the effective
1% rate to the computable assets at year-end. This tax is supplementary to the income
tax. The Companys tax obligation for each tax year shall be the higher of these two
taxes. However, should minimum presumed income tax
exceed income tax in a given fiscal year, such excess may be computed as payment on
account of any income tax excess over minimum presumed income tax that could occur in any
of the ten subsequent years.
  F-110




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##### Table of Contents



As of December 31, 2007, the income tax amount calculated exceeded minimum presumed
income tax. Note 3.m to these financial statements discloses the changes and breakdown of
income tax and deferred tax accounts.The Companys sales on the domestic market are subject to valued added tax (VAT) at the
general 21% rate. However, as provided for in Law No. 26,020, effective April 17, 2005,
propane, butane, and LPG sales on the domestic market were subject to a differential
10.5% rate.i)
    
    Contingencies:Certain conditions may exist as of the date of financial statements which may result in a
loss to the Company, but which will only be resolved when one or more future events occur
or fail to occur. Such contingent liabilities are assessed by the Companys Management
based on the opinion of its legal counsel and the available evidence.Such contingencies include outstanding lawsuits or claims for possible damages to third
parties in the ordinary course of the Companys business, as well as third party claims
arising from disputes concerning the interpretation of legislation.If the assessment of a contingency indicates that it is probable that a loss has been
incurred and the amount of the loss can be estimated, a liability is accrued in the
Other liabilities account. If the assessment indicates that a potential loss
contingency is not probable, but is reasonably possible, or is probable but cannot be
estimated, then the nature of the contingent liability, together with an estimate of the
possibility of occurrence, is disclosed in a note to the financial statements. Loss
contingencies considered remote are not disclosed unless they involve guarantees, in
which case the nature of the guarantee is disclosed.j)
    
    Shareholders equity accounts:These accounts have been restated as mentioned in Note 2.II, except for the Capital
stock account, which has been kept at original value. The adjustment resulting from such
restatement is disclosed under the caption Adjustment to capital stock.k)
    
    Statement of income accounts:
 
    
    Income and expenses were valued at their nominal value.
    
    The charges for consumption of non-monetary assets were determined based
on the restated values of such assets.
    
    Financial income (expenses) and holding gains (losses) are broken down
between those generated by assets and those generated by liabilities and they
include nominal financial income and expenses, foreign exchange differences, the
effects of inflation on monetary assets and liabilities and other holding gains
(losses).
  F-111




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##### Table of Contents



3. BREAKDOWN OF MAIN ACCOUNTS
  Unaudited2007
    
    
    2006a) Investments:Certificates of deposit
    
    
    38,267
    
    
    
    5,155Mutual funds
    
    
    47,376
    
    
    
    41,85085,643
    
    
    
    47,005
 Unaudited2007
    
    
    2006b) Trade receivables:Common receivables
    
    
    27,111
    
    
    
    12,609Receivables under litigation
    
    
    5,436
    
    
    
    5,742Shareholder companies: YPF S.A.
    
    
    34,404
    
    
    
    11,034 Petrobras Energía S.A.
    
    
    20,219
    
    
    
    16,012 Pluspetrol S.A.
    
    
    7,998
    
    
    
    2,864Related companies: Repsol YPF Trading y Transporte S.A.
    
    
    34,677
    
    
    
    75,811 Pluspetrol Energy S.A.
    
    
    
    
    
    
    3129,845
    
    
    
    124,075Less: Allowance for doubtful accounts (Exhibit V)
    
    
    (4,597
    )
    
    
    (5,395
    )125,248
    
    
    
    118,680c) Other receivables:Current:VAT credit
    
    
    141,971
    
    
    
    138,499Advances to suppliers
    
    
    2,944
    
    
    
    1,277Prepaid insurance
    
    
    2,204
    
    
    
    2,505Tax on fuel transfers credit
    
    
    1,293
    
    
    
    Court deposit
    
    
    650
    
    
    
    709Turnover tax credit
    
    
    493
    
    
    
    Tax on diesel oil transfer or import credit
    
    
    388
    
    
    
    1,451Prepaid expenses
    
    
    170
    
    
    
    363Income tax credit
    
    
    
    
    
    
    6,918Notes receivable
    
    
    1,037
    
    
    
    865Less: Allowance for doubtful accounts (Exhibit V)
    
    
    (393
    )
    
    
    (393
    )Other
    
    
    2,343
    
    
    
    1,008153,100
    
    
    
    153,202Non-current:Turnover tax credit
    
    
    719
    
    
    
    3,053Notes receivable
    
    
    556
    
    
    
    1,430Deferred tax asset (Note 3.m)
    
    
    38
    
    
    
    13,440Other
    
    
    163
    
    
    
    701,476
    
    
    
    17,993d) Inventories:Refined products
    
    
    114,857
    
    
    
    69,171Crude oil
    
    
    32,157
    
    
    
    21,956Materials and spare parts
    
    
    39,108
    
    
    
    24,642Allowance for materials  ́ impairment (Exhibit V)
    
    
    (4,206
    )
    
    
    (4,206
    )Other
    
    
    3,875
    
    
    
    675185,791
    
    
    
    112,238
  F-112




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##### Table of Contents



Unaudited2007
    
    
    2006e) Accounts payable:Common suppliers
    
    
    157,405
    
    
    
    134,908Shareholder companies: YPF S.A.
    
    
    89,552
    
    
    
    85,781 Petrobras Energía S.A.
    
    
    17,834
    
    
    
    10,782 Pluspetrol S.A.
    
    
    3,292
    
    
    
    2,807268,083
    
    
    
    234,278Related companies: Pluspetrol Energy S.A.
    
    
    2,910
    
    
    
    3,780 World Energy Business S.A.
    
    
    1,247
    
    
    
     Petrobras Bolivia S.A.
    
    
    
    
    
    
    12,472 Pluspetrol Bolivia Corporation S.A.
    
    
    
    
    
    
    10 Petrobras Energía S.A.  Sucursal Bolivia
    
    
    
    
    
    
    2,934272,240
    
    
    
    253,474f) Loans:Short-term bank loans
    
    
    86,652
    
    
    
    78,272Interest payable
    
    
    1,488
    
    
    
    1,57688,140
    
    
    
    79,848g) Taxes payable:Income tax, net of prepayments and withholdings
    
    
    38,597
    
    
    
    Withholdings
    
    
    6,691
    
    
    
    3,371Turnover tax
    
    
    463
    
    
    
    Other
    
    
    75
    
    
    
    8545,826
    
    
    
    3,456h) Other liabilitiesCurrent:Provisions (Exhibit V)
    
    
    
    
    
    
    29,369
    
    
    
    29,369Non-current:Easement
    
    
    1,713
    
    
    
    1,427Provisions (Exhibit V)
    
    
    7,766
    
    
    
    7,5759,479
    
    
    
    9,002
 Income (Loss)Unaudited2007
    
    
    2006i) Net sales:Gross sales (1)
    
    
    1,535,489
    
    
    
    1,547,099Tax on exports (Note 4)
    
    
    (50,033
    )
    
    
    (30,679
    )1,485,456
    
    
    
    1,516,420
 (1)
    
    Sales for the fiscal year ended December
31, 2007 were mainly made to Repsol YPF
Trading y Transporte S.A., YPF S.A.,
Petrobras Energía S.A. and Yacimientos
Petrolíferos Fiscales Bolivianos,
representing about 49%, 9%, 7%, and 4%,
respectively, of total gross sales.  F-113




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##### Table of Contents



Income (Loss)Unaudited2007
    
    
    2006j) Cost of sales:Inventories in stock at the beginning of year
    
    
    130,775
    
    
    
    123,611Purchases of goods and services
    
    
    1,013,040
    
    
    
    1,106,142Operating expenses (Exhibit II)
    
    
    121,009
    
    
    
    97,364Inventory holding gains (losses) (Note 3.k)
    
    
    24,032
    
    
    
    (9,757
    )Plant idle capacity
    
    
    (10,924
    )
    
    
    (5,884
    )Less: Inventories in stock at end of year
    
    
    (203,419
    )
    
    
    (130,775
    )1,074,513
    
    
    
    1,180,701k) Financial income (expenses) and holding gains (losses):From assets:Foreign exchange differences
    
    
    4,012
    
    
    
    718Inventory holding gains (losses)
    
    
    24,032
    
    
    
    (9,757
    )Interest accrued
    
    
    5,372
    
    
    
    3,964Assets discounts
    
    
    (1,054
    )
    
    
    (1,477
    )Other
    
    
    335
    
    
    
    29Subtotal from assets
    
    
    32,697
    
    
    
    (6,523
    )From liabilities:Foreign exchange differences
    
    
    (3,282
    )
    
    
    (1,457
    )Interest accrued
    
    
    (9,427
    )
    
    
    (8,017
    )Commissions and other bank expenses
    
    
    (285
    )
    
    
    548Liabilities discounts
    
    
    (1,312
    )
    
    
    (1,045
    )Subtotal from liabilities
    
    
    (14,306
    )
    
    
    (9,971
    )18,391
    
    
    
    (16,494
    )l) Other income (expenses), net:Agreement with Salta tax authority
    
    
    
    
    
    
    (37,200
    )Reestimation of provisions and reserves
    
    
    (879
    )
    
    
    3,374Other
    
    
    2,180
    
    
    
    (1,697
    )1,301
    
    
    
    (35,523
    )m) Current and deferred income tax:
  Unaudited2007
    
    
    2006Estimated current income tax payable
    
    
    (86,940
    )
    
    
    (65,436
    )Changes in deferred tax
    
    
    (13,402
    )
    
    
    10,484Total income tax
    
    
    (100,342
    )
    
    
    (54,952
    )
  F-114




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##### Table of Contents



Unaudited2007
    
    
    2006Income for the year before income tax
    
    
    268,217
    
    
    
    144,144Effective tax rate
    
    
    35
    %
    
    
    35
    %(93,876
    )
    
    
    (50,450
    )Permanent differences at tax rate:- Restatement into constant pesos
    
    
    (4,074
    )
    
    
    (4,119
    )- Non-deductible valuation adjustments
    
    
    (2,275
    )
    
    
    (412
    )- Other
    
    
    (117
    )
    
    
    29Total income tax
    
    
    (100,342
    )
    
    
    (54,952
    )
  Unaudited2007
    
    
    2006Net deferred taxDeferred tax assets- Non-deductible allowances and provisions
    
    
    3,357
    
    
    
    15,393- Difference from foreign investments
    
    
    
    
    
    
    2,615- Other, not individually significant
    
    
    1,241
    
    
    
    575Deferred tax liabilities- Valuation of inventories
    
    
    (4,560
    )
    
    
    (5,143
    )38
    
    
    
    13,440
 4. MAIN COMMITMENTS ASSUMED BY THE COMPANY AND CONTINGENCIES
 Commitments
  Natural gas by-productsCondensed and crude oil
    
    
    Volume
    
    
    Price/Volume
    
    
    Price/
    
    
    Million
    
    
    M
    
    
    M
    
    
    MillionYear
    
    M Bbl
    
    
    M Bbl
    
    
    s ARS
    
    
    MMBTU
    
    
    MMBTU
    
    
    s ARS2008
    
    
    1,145
    
    
    
    0.138
    
    
    
    158
    
    
    
    14,046
    
    
    
    0.0092
    
    
    
    1292009
    
    
    620
    
    
    
    0.132
    
    
    
    82
    
    
    
    13,441
    
    
    
    0.0093
    
    
    
    1252010
    
    
    305
    
    
    
    0.131
    
    
    
    40
    
    
    
    9,231
    
    
    
    0.0092
    
    
    
    852011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,394
    
    
    
    0.0090
    
    
    
    672012 and subsequent
years
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,667
    
    
    
    0.00876
    
    
    
    102Total
    
    
    2,070
    
    
    
    
    
    
    
    280
    
    
    
    55,779
    
    
    
    
    
    
    
    508
  F-115




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##### Table of Contents



Catalytic gasoline
    
    
    MTBEVolume
    
    
    Price/
    
    
    Millions
    
    
    Volume
    
    
    Price/
    
    
    MillionsYear
    
    M M3
    
    
    M M3
    
    
    ARS
    
    
    M Tn
    
    
    M Tn
    
    
    ARS2008
    
    
    24
    
    
    
    1.13
    
    
    
    27
    
    
    
    8.54
    
    
    
    2.43
    
    
    
    21Total
    
    
    24
    
    
    
    
    
    
    
    27
    
    
    
    8.54
    
    
    
    
    
    
    
    21
  Virgin gasoline
    
    
    Diesel oilVolume
    
    
    Price/
    
    
    Millions
    
    
    Volume
    
    
    Price/
    
    
    MillionsYear
    
    M Tn
    
    
    M Tn
    
    
    ARS
    
    
    M M3
    
    
    M M3
    
    
    ARS2008
    
    
    139
    
    
    
    1.848
    
    
    
    257
    
    
    
    14
    
    
    
    1.081
    
    
    
    15Total
    
    
    139
    
    
    
    
    
    
    
    257
    
    
    
    14
    
    
    
    
    
    
    
    15
 Interface
    
    
    LPGVolum
    
    
    Price/
    
    
    Million
    
    
    Volume
    
    
    Price/
    
    
    MillionsYear
    
    M Tn
    
    
    M Tn
    
    
    s ARS
    
    
    M Tn
    
    
    M Tn
    
    
    ARS2008
    
    
    27
    
    
    
    0.76
    
    
    
    21
    
    
    
    64
    
    
    
    0.782
    
    
    
    50Total
    
    
    27
    
    
    
    
    
    
    
    21
    
    
    
    64
    
    
    
    
    
    
    
    50
   Regulations
    F-116




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##### Table of Contents



Agreement with oil and gas companies
   Claims and litigation
 Gasoline sales to Paraguay
   Jujuys tax authorities claim
   F-117




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##### Table of Contents



Other claims
  5. TRANSACTIONS WITH SHAREHOLDER COMPANIES AND RELATED COMPANIES
  Unaudited2007
    
    
    2006Sale of products and services:Shareholder companies: YPF S.A.
    
    
    136,486
    
    
    
    155,709 Petrobras Energía S.A.
    
    
    108,396
    
    
    
    142,635 Pluspetrol S.A.
    
    
    52,211
    
    
    
    50,432Related companies: Repsol YPF Trading y Transporte S.A.
    
    
    694,045
    
    
    
    661,827 Petrobras Bolivia Distribución S.A.
    
    
    
    
    
    
    60,435 Pluspetrol Energy S.A.
    
    
    32
    
    
    
    212 Pluspetrol Bolivia Corporation S.A.
    
    
    12
    
    
    
    27991,182
    
    
    
    1,071,277Purchases of products and services:Shareholder companies: YPF S.A.
    
    
    418,058
    
    
    
    391,959 Petrobras Energía S.A.
    
    
    34,080
    
    
    
    98,736 Pluspetrol S.A.
    
    
    42,244
    
    
    
    52,373 Petrobras Energía S.A  Fees to the operator (1)
    
    
    3,151
    
    
    
    3,079Related companies: Pluspetrol Energy S.A.
    
    
    35,147
    
    
    
    31,749 Petrobras Bolivia S.A.
    
    
    20,384
    
    
    
    42,128 World Energy Business S.A.
    
    
    9,885
    
    
    
     Pluspetrol Bolivia Corporation S.A.
    
    
    5,919
    
    
    
    10,974 Petrobras Energia S.A.  Sucursal Bolivia
    
    
    5,897
    
    
    
    12,520 Petroleo Brasileiro S.A.
    
    
    4,554
    
    
    
     Empresa Petrolera Andina S.A.
    
    
    
    
    
    
    31,138579,319
    
    
    
    674,656
 (1)
    
    The Company is committed to recognizing technical operation assistance fees
equivalent to 5% of gross earnings, up to an accumulated cap of USD 1,000,000 per fiscal
year.  F-118




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##### Table of Contents



6. CAPITAL STOCK BREAKDOWN AND RETAINED EARNINGS RESTRICTION
  SharesClass
    
    
    NumberPetrobras Energía S.A.
    
    
    A
    
    
    
    26,108,078Pluspetrol S.A.
    
    
    A
    
    
    
    19,695,577YPF S.A.
    
    
    B
    
    
    
    45,803,655Total
    
    
    
    
    
    
    91,607,310
    F-119




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##### Table of Contents



EXHIBIT I
 REFINERÍA DEL NORTE S.A.CHANGES IN PROPERTY, PLANT AND EQUIPMENT AS OF DECEMBER 31, 2007 AND 2006
 2007 (Unaudited)Original costAtMain account
    
    beginning
    
    
    Additions
    
    
    Transfers
    
    
    Decreases
    
    
    At endGas stations
    
    
    20,011
    
    
    
    
    
    
    
    703
    
    
    
    (331
    )
    
    
    20,383Buildings and construction
    
    
    17,847
    
    
    
    
    
    
    
    1,166
    
    
    
    (3,806
    )
    
    
    15,207Compression plant equipment and facilities
    
    
    10,089
    
    
    
    
    
    
    
    1,532
    
    
    
    
    
    
    
    11,621Pumping stations equipment and facilities
    
    
    24,294
    
    
    
    
    
    
    
    942
    
    
    
    
    
    
    
    25,236Multiple pipeline equipment and facilities
    
    
    139,228
    
    
    
    
    
    
    
    5,360
    
    
    
    (659
    )
    
    
    143,929Refinery equipment and facilities
    
    
    365,106
    
    
    
    
    
    
    
    43,632
    
    
    
    
    
    
    
    408,738Tools
    
    
    4,478
    
    
    
    1,248
    
    
    
    
    
    
    
    (24
    )
    
    
    5,702Software
    
    
    16,980
    
    
    
    1,008
    
    
    
    
    
    
    
    (1,414
    )
    
    
    16,574Furniture and office supplies
    
    
    5,532
    
    
    
    12
    
    
    
    
    
    
    
    (576
    )
    
    
    4,968Vehicles
    
    
    5,385
    
    
    
    64
    
    
    
    
    
    
    
    (92
    )
    
    
    5,357Storage and dispatch units
    
    
    45,913
    
    
    
    
    
    
    
    3,404
    
    
    
    
    
    
    
    49,317Works in process
    
    
    51,997
    
    
    
    22,245
    
    
    
    (41,072
    )
    
    
    
    
    
    
    33,170Plots of land
    
    
    3,649
    
    
    
    
    
    
    
    
    
    
    
    (30
    )
    
    
    3,619Advances to suppliers
    
    
    1,183
    
    
    
    4,463
    
    
    
    (3,647
    )
    
    
    
    
    
    
    1,999Materials and spare parts
    
    
    6,031
    
    
    
    11,212
    
    
    
    (12,020
    )
    
    
    
    
    
    
    5,223Total as of 12/31/2007 (Unaudited)
    
    
    717,723
    
    
    
    40,252
    
    
    
    
    
    
    
    (6,932
    )
    
    
    751,043Total as of 12/31/2006 (Unaudited)
    
    
    651,242
    
    
    
    67,279
    
    
    
    
    
    
    
    (798
    )
    
    
    717,723
 (Unaudited)2007
    
    
    2006Accumulated depreciationFor the yearAt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net book
    
    
    Net bookMain account
    
    beginning
    
    
    Rate %
    
    Amount
    
    
    Decreases
    
    
    At end
    
    
    Value
    
    
    ValueGas stations
    
    
    10,767
    
    
    4 to 7
    
    
    1,388
    
    
    
    (324
    )
    
    
    11,831
    
    
    
    8,552
    
    
    
    9,244Buildings and construction
    
    
    6,887
    
    
    2 to 10
    
    
    940
    
    
    
    (2,449
    )
    
    
    5,378
    
    
    
    9,829
    
    
    
    10,960Compression plant equipment and
facilities
    
    
    310
    
    
    3 to 7
    
    
    564
    
    
    
    
    
    
    
    874
    
    
    
    10,747
    
    
    
    9,779Pumping stations equipment and
facilities
    
    
    10,587
    
    
    4 to 6
    
    
    1,101
    
    
    
    
    
    
    
    11,688
    
    
    
    13,548
    
    
    
    13,707Multiple pipeline equipment and
facilities
    
    
    59,178
    
    
    2 to 6
    
    
    5,104
    
    
    
    (388
    )
    
    
    63,894
    
    
    
    80,035
    
    
    
    80,050Refinery equipment and facilities
    
    
    185,066
    
    
    4 to 10
    
    
    27,939
    
    
    
    
    
    
    
    213,005
    
    
    
    195,733
    
    
    
    180,040Tools
    
    
    3,832
    
    
    9 to 20
    
    
    287
    
    
    
    (21
    )
    
    
    4,098
    
    
    
    1,604
    
    
    
    646Software
    
    
    13,954
    
    
    10 to 33
    
    
    1,225
    
    
    
    (816
    )
    
    
    14,363
    
    
    
    2,211
    
    
    
    3,026Furniture and office supplies
    
    
    5,147
    
    
    10 to 20
    
    
    123
    
    
    
    (550
    )
    
    
    4,720
    
    
    
    248
    
    
    
    385Vehicles
    
    
    4,628
    
    
    20
    
    
    360
    
    
    
    (86
    )
    
    
    4,902
    
    
    
    455
    
    
    
    757Storage and dispatch units
    
    
    16,615
    
    
    4 to 10
    
    
    2,022
    
    
    
    
    
    
    
    18,637
    
    
    
    30,680
    
    
    
    29,298Works in process
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,170
    
    
    
    51,997Plots of land
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,619
    
    
    
    3,649Advances to suppliers
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,999
    
    
    
    1,183Materials and spare parts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,223
    
    
    
    6,031Total as of 12/31/2007 (Unaudited)
    
    
    316,971
    
    
    
    
    
    41,053
    
    
    
    (4,634
    )
    
    
    353,390
    
    
    
    397,653Total as of 12/31/2006 (Unaudited)
    
    
    279,919
    
    
    
    
    
    37,641
    
    
    
    (589
    )
    
    
    316,971
    
    
    
    
    
    
    
    400,752
  F-120




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##### Table of Contents



EXHIBIT II
 REFINERÍA DEL NORTE S.A.
 INFORMATION REQUIRED UNDER SECTION 64 (1) b OF LAW No. 19,550
FOR THE FISCAL YEARS ENDED DECEMBER 31, 2007 AND 2006
 Unaudited2006
    
    
    2007Operating
    
    
    Administrative
    
    
    SellingAccounts
    
    
    
    
    
    Total
    
    
    expenses
    
    
    expenses
    
    
    expensesPayroll and social security taxes
    
    
    32,693
    
    
    
    40,435
    
    
    
    6,388
    
    
    
    18,238
    
    
    
    15,809Other employee benefits
    
    
    4,688
    
    
    
    4,958
    
    
    
    502
    
    
    
    2,932
    
    
    
    1,524Taxes, charges and contributions
    
    
    19,848
    
    
    
    23,672
    
    
    
    1,097
    
    
    
    11,900
    
    
    
    10,675Depreciation of property, plant
and equipment
    
    
    37,641
    
    
    
    41,053
    
    
    
    29,926
    
    
    
    864
    
    
    
    10,263Intangible assets amortization
    
    
    842
    
    
    
    842
    
    
    
    
    
    
    
    
    
    
    
    842Maintenance expenses
    
    
    16,092
    
    
    
    27,526
    
    
    
    18,394
    
    
    
    1,289
    
    
    
    7,843Transportation and storage expenses
    
    
    26,798
    
    
    
    33,006
    
    
    
    
    
    
    
    
    
    
    
    33,006Electric power, fuels and
lubricants and other
    
    
    43,623
    
    
    
    51,801
    
    
    
    48,752
    
    
    
    66
    
    
    
    2,983Consumption of materials and spare
parts
    
    
    7,372
    
    
    
    8,381
    
    
    
    5,856
    
    
    
    640
    
    
    
    1,885Insurance
    
    
    6,042
    
    
    
    6,534
    
    
    
    4,539
    
    
    
    491
    
    
    
    1,504Works and other services contracted
    
    
    16,986
    
    
    
    16,477
    
    
    
    4,698
    
    
    
    5,728
    
    
    
    6,051Communications
    
    
    2,493
    
    
    
    2,397
    
    
    
    198
    
    
    
    641
    
    
    
    1,558Traveling and living expenses
    
    
    1,296
    
    
    
    1,179
    
    
    
    43
    
    
    
    696
    
    
    
    440Advertising
    
    
    2,997
    
    
    
    2,047
    
    
    
    
    
    
    
    
    
    
    
    2,047Professional fees
    
    
    5,702
    
    
    
    5,453
    
    
    
    207
    
    
    
    4,991
    
    
    
    255Other
    
    
    5,925
    
    
    
    6,742
    
    
    
    409
    
    
    
    2,717
    
    
    
    3,616Total 2007 (Unaudited)
    
    
    
    
    
    
    272,503
    
    
    
    121,009
    
    
    
    51,193
    
    
    
    100,301Total 2006 (Unaudited)
    
    
    231,038
    
    
    
    
    
    
    
    97,364
    
    
    
    43,294
    
    
    
    90,380
  F-121




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##### Table of Contents



EXHIBIT III
 REFINERÍA DEL NORTE S.A.
 ASSETS AND LIABILITIES IN FOREIGN CURRENCY
AS OF DECEMBER 31, 2007 AND 2006
 Unaudited2006
    
    
    2007Effective
    
    
    Booked amountCurrency and
    
    
    Currency and
    
    
    exchange
    
    
    in thousands ofItem
    
    amount
    
    
    amount
    
    
    rate
    
    
    Argentine pesosCURRENT ASSETSCash
    
    USD
    
    
    7
    
    
    USD
    
    
    7
    
    
    
    (a
    )
    
    
    3.151
    
    
    
    22Investments
    
    USD
    
    
    14,630
    
    
    USD
    
    
    26,983
    
    
    
    (a
    )
    
    
    3.151
    
    
    
    85,023Trade receivables
    
    USD
    
    
    23,529
    
    
    USD
    
    
    13,860
    
    
    
    (a
    )
    
    
    3.151
    
    
    
    43,673Other receivables
    
    USD
    
    
    86
    
    
    USD
    
    
    65
    
    
    
    (a
    )
    
    
    3.151
    
    
    
    205Total current assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    128,923CURRENT LIABILITIESAccounts payable
    
    USD
    
    
    30,261
    
    
    USD
    
    
    25,708
    
    
    
    (a
    )
    
    
    3.151
    
    
    
    81,006Accounts payable
    
    EUR
    
    
    502
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Advances from customers
    
    USD
    
    
    1,701
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loans
    
    USD
    
    
    25,984
    
    
    USD
    
    
    27,972
    
    
    
    (a
    )
    
    
    3.151
    
    
    
    88,140Total current liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    169,146
 (a)
    
    Benchmark exchange rate of the BCRA (Central Bank of Argentina).USD: United States DollarsEUR: Euros  F-122




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##### Table of Contents



EXHIBIT IV
 REFINERÍA DEL NORTE S.A.
 BREAKDOWN OF CURRENT INVESTMENTS, RECEIVABLES, LOANS AND OTHER LIABILITIES
AS OF DECEMBER 31, 2007
  UnauditedAssets
    
    
    LiabilitiesCurrent
    
    
    
    
    
    
    
    
    
    
    OtherTerm
    
    investments
    
    
    Receivables
    
    
    Loans
    
    
    liabilitiesWith no maturity
    
    
    
    
    
    
    142,812
    (5)
    
    
    
    
    
    
    90,825
    (6)With maturityMatured:- Up to 3 months
    
    
    
    
    
    
    39,699
    
    
    
    
    
    
    
    8,248- From 3 to 6 months
    
    
    
    
    
    
    419
    
    
    
    
    
    
    
    329- From 6 to 9 months
    
    
    
    
    
    
    73
    
    
    
    
    
    
    
    564- From 9 to 12
months
    
    
    
    
    
    
    44
    
    
    
    
    
    
    
    181- From 1 to 2 years
    
    
    
    
    
    
    34
    
    
    
    
    
    
    
    234- Over 2 years
    
    
    
    
    
    
    8,290
    
    
    
    
    
    
    
    636Total matured
    
    
    
    
    
    
    48,559
    
    
    
    
    
    
    
    10,192To mature:- Up to 3 months
    
    
    85,643
    
    
    
    92,487
    
    
    
    49,212
    
    
    
    194,117- From 3 to 6 months
    
    
    
    
    
    
    24
    
    
    
    22,429
    
    
    
    - From 6 to 9 months
    
    
    
    
    
    
    24
    
    
    
    16,127
    
    
    
    - From 9 to 12
months
    
    
    
    
    
    
    139
    
    
    
    372
    
    
    
    41,748- From 1 to 2 years
    
    
    
    
    
    
    2,232
    
    
    
    
    
    
    
    - Over 2 years
    
    
    
    
    
    
    1,045
    
    
    
    
    
    
    
    Total to mature
    
    
    85,643
    
    
    
    95,951
    
    
    
    88,140
    
    
    
    235,865Total with maturity
    
    
    85,643
    
    
    
    144,510
    
    
    
    88,140
    
    
    
    246,057Total
    
    
    85,643
    (1)
    
    
    287,322
    (2)
    
    
    88,140
    (3)
    
    
    336,882
    (4)
 (1)
    
    Accruing interest at a variable rate of about 5.22% per annum.(2)
    
    Receivables are disclosed excluding the allowance for doubtful accounts.
Approximately 94% does not accrue interest, accruing the rest, interest at a fixed rate.
The average weighted rate is approximately 6% per annum.(3)
    
    Loans accrue interest at a fixed rate. The average weighted rate, including taxes
on interest, is approximately 5.13% per annum.(4)
    
    Not accruing interest, except for the accrual for purchase of raw material under
the agreement with oil & gas producing companies amounting to 80,210, accruing interest
at LIBOR.(5)
    
    Related to the balances of social contributions credit and tax credit.(6)
    
    Related to other liabilities and accrual for purchase of raw material under the
agreement with oil & gas producing companies.  F-123




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##### Table of Contents



EXHIBIT V
 REFINERÍA DEL NORTE S.A.
 CHANGES IN ALLOWANCES AND RESERVES AS OF DECEMBER 31, 2007 AND 2006
 Unaudited2007Balances at
    
    
    
    
    
    
    
    
    
    
    Balances atthe beginning
    
    
    
    
    
    
    
    
    
    
    the endItem
    
    of the year
    
    
    Increases
    
    
    Decreases
    
    
    of the yearDeducted from assets:- Allowance for doubtful accounts
    
    
    5,788
    
    
    
    51
    
    
    
    (849
    )
    
    
    4,990- Allowance for materials  ́ impairment
    
    
    4,206
    
    
    
    
    
    
    
    
    
    
    
    4,206Total 2007 (Unaudited)
    
    
    9,994
    
    
    
    51
    (1)
    
    
    (849
    )(1)
    
    
    9,196Total 2006 (Unaudited)
    
    
    11,078
    
    
    
    635
    
    
    
    (1,719
    )
    
    
    9,994Included in liabilities:- Provisions
    
    
    36,944
    
    
    
    924
    
    
    
    (30,102
    )
    
    
    7,766Total 2007 (Unaudited)
    
    
    36,944
    
    
    
    924
    (1)
    
    
    (30,102
    )(2)
    
    
    7,766Total 2006 (Unaudited)
    
    
    10,070
    
    
    
    38,596
    
    
    
    (11,722
    )
    
    
    36,944
 (1)
    
    Charge for the year allocated to Other income (expenses), net account in the
statement of income.(2)
    
    Used over the year.  F-124




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##### Table of Contents



REFINERÍA DEL NORTE S.A.
 
 STATEMENTS OF INCOME
 FOR THE FISCAL YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
  Unaudited2005
    
    
    2004
    
    
    2003NET SALES (Note 3.h)
    
    
    1,429,111
    
    
    
    1,090,540
    
    
    
    881,680COST OF SALES (Note 3.i)
    
    
    (1,068,411
    )
    
    
    (766,726
    )
    
    
    (617,883
    )Gross profit
    
    
    360,700
    
    
    
    323,814
    
    
    
    263,797ADMINISTRATIVE EXPENSES (Exhibit II)
    
    
    (35,984
    )
    
    
    (31,364
    )
    
    
    (28,202
    )SELLING EXPENSES (Exhibit II)
    
    
    (78,911
    )
    
    
    (72,816
    )
    
    
    (65,057
    )OTHER EXPENSES
    
    
    (1,152
    )
    
    
    (3,464
    )
    
    
    (3,215
    )FINANCIAL INCOME (EXPENSE) AND
HOLDING GAINS (LOSSES) (Note 3.j)
    
    
    6,694
    
    
    
    4,739
    
    
    
    (9,803
    )OTHER INCOME, NET (Note 3.k)
    
    
    4,094
    
    
    
    2,828
    
    
    
    3,019Income before income tax
    
    
    255,441
    
    
    
    223,737
    
    
    
    160,539INCOME TAX (Note 3.l)
    
    
    (95,201
    )
    
    
    (83,035
    )
    
    
    (62,612
    )Net income for the year
    
    
    160,240
    
    
    
    140,702
    
    
    
    97,927
   F-125




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##### Table of Contents



REFINERÍA DEL NORTE S.A.
 
 BALANCE SHEETS AS OF DECEMBER 31, 2005 AND 2004
  Unaudited2005
    
    
    2004ASSETSCURRENT ASSETSCash
    
    
    2,301
    
    
    
    1,438Investments (Note 3.a)
    
    
    4,444
    
    
    
    55,696Trade receivables (Note 3.b)
    
    
    175,509
    
    
    
    131,640Other receivables (Note 3.c)
    
    
    65,983
    
    
    
    29,014Inventories (Note 3.d)
    
    
    105,037
    
    
    
    94,826Total current assets
    
    
    353,274
    
    
    
    312,614NON-CURRENT ASSETSInvestments (Note 2.III.a)
    
    
    3
    
    
    
    Trade receivables
    
    
    3,292
    
    
    
    3,438Other receivables (Note 3.c)
    
    
    9,876
    
    
    
    8,847Materials and spare parts
    
    
    18,574
    
    
    
    13,725Property, plant and equipment (Exhibit I)
    
    
    371,323
    
    
    
    362,624Intangible assets
    
    
    2,392
    
    
    
    2,215Total non-current assets
    
    
    405,460
    
    
    
    390,849Total assets
    
    
    758,734
    
    
    
    703,463LIABILITIESCURRENT LIABILITIESAccounts payable (Note 3.e)
    
    
    224,904
    
    
    
    190,674Loans (Note 3.f)
    
    
    79,568
    
    
    
    77,291Payroll and social security taxes
    
    
    6,584
    
    
    
    4,604Taxes payable (Note 3.g)
    
    
    31,518
    
    
    
    40,820Total current liabilities
    
    
    342,574
    
    
    
    313,389NON-CURRENT LIABILITIESOther liabilities (Exhibit V)
    
    
    11,652
    
    
    
    10,429Total non-current liabilities
    
    
    11,652
    
    
    
    10,429Total liabilities
    
    
    354,226
    
    
    
    323,818SHAREHOLDERS EQUITY(as per related statements)
    
    
    404,508
    
    
    
    379,645758,734
    
    
    
    703,463
   F-126




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##### Table of Contents



REFINERÍA DEL NORTE S.A.
 
 STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
 FOR THE FISCAL YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
  Unaudited2005
    
    
    2004
    
    
    2003Shareholderscontributions
    
    
    Retained earningsAdjustment
    
    
    
    
    
    
    
    
    
    
    InappropriateCapital
    
    
    to capital
    
    
    Legal
    
    
    Voluntary
    
    
    retainedstock
    
    
    stock
    
    
    reserve
    
    
    reserve
    
    
    earnings
    
    
    Total
    
    
    Total
    
    
    TotalBalances at beginning of
the year
    
    
    91,607
    
    
    
    130,190
    
    
    
    15,436
    
    
    
    44,937
    
    
    
    97,475
    
    
    
    379,645
    
    
    
    354,324
    
    
    
    311,410Decisions of the Regular
Shareholders Meetings of
March 24, 2003, December
15, 2003, April 1, 2004,
April 15, 2005, and
December 15, 2005:- Earnings distribution:to cash dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (44,937
    )
    
    
    (90,440
    )
    
    
    (135,377
    )
    
    
    (115,381
    )
    
    
    (55,013
    )to legal reserve
    
    
    
    
    
    
    
    
    
    
    7,035
    
    
    
    
    
    
    
    (7,035
    )
    
    
    
    
    
    
    
    
    
    
    Net income for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    160,240
    
    
    
    160,240
    
    
    
    140,702
    
    
    
    97,927Balances at end of the year
    
    
    91,607
    
    
    
    130,190
    
    
    
    22,471
    
    
    
    
    
    
    
    160,240
    
    
    
    404,508
    
    
    
    379,645
    
    
    
    354,324
   F-127




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##### Table of Contents



REFINERÍA DEL NORTE S.A.
 
 STATEMENTS OF CASH FLOWS (1)
 FOR THE FISCAL YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
  Unaudited2005
    
    
    2004
    
    
    2003Cash provided by operations:Net income for the year
    
    
    160,240
    
    
    
    140,702
    
    
    
    97,927Adjustments to reconcile the net income for the year
to the cash provided by operations:Income tax accrued
    
    
    95,201
    
    
    
    83,035
    
    
    
    62,612Income tax paid
    
    
    (89,151
    )
    
    
    (95,486
    )
    
    
    (15,549
    )Depreciation of property, plant and equipment
    
    
    33,978
    
    
    
    32,878
    
    
    
    28,192Property, plant and equipment retirements
    
    
    190
    
    
    
    2,781
    
    
    
    1,190Intangible assets amortization
    
    
    922
    
    
    
    872
    
    
    
    890Reestimation of provisions and reserves
    
    
    3,954
    
    
    
    (3,222
    )
    
    
    (1,847
    )Interest accrued
    
    
    4,436
    
    
    
    4,743
    
    
    
    9,237Interest paid
    
    
    (2,388
    )
    
    
    (5,135
    )
    
    
    (12,389
    )Inventory holding (gains) losses
    
    
    (14,388
    )
    
    
    (11,060
    )
    
    
    5,706Consumption of materials and spare parts
    
    
    6,189
    
    
    
    6,465
    
    
    
    4,843Compensation for contractual breach
    
    
    (8,519
    )
    
    
    
    
    
    
    Other financial income, net
    
    
    1,243
    
    
    
    2,021
    
    
    
    13,824Changes in assets and liabilitiesTrade receivables
    
    
    (43,735
    )
    
    
    (35,040
    )
    
    
    12,182Other receivables
    
    
    (29,479
    )
    
    
    (13,300
    )
    
    
    8,289Inventories
    
    
    (6,861
    )
    
    
    12,739
    
    
    
    (31,781
    )Accounts payable
    
    
    34,230
    
    
    
    67,615
    
    
    
    (24,683
    )Payroll and social security taxes and taxes payable
    
    
    (16,478
    )
    
    
    3,690
    
    
    
    (9,338
    )Other liabilities
    
    
    (1,655
    )
    
    
    992
    
    
    
    7,749Cash provided by operations
    
    
    127,929
    
    
    
    195,290
    
    
    
    157,054Cash used in investing activities:Acquisition of property, plant and equipment
    
    
    (43,153
    )
    
    
    (46,750
    )
    
    
    (44,338
    )Investments other than cash
    
    
    (191
    )
    
    
    
    
    
    
    Sale of property, plant and equipment
    
    
    286
    
    
    
    
    
    
    
    Increase in intangible assets
    
    
    (1,099
    )
    
    
    (1,048
    )
    
    
    (254
    )Cash used in investing activities
    
    
    (44,157
    )
    
    
    (47,798
    )
    
    
    (44,592
    )Cash used in financing activities:Net short-term loans obtained (paid)
    
    
    1,410
    
    
    
    (26,762
    )
    
    
    (66,978
    )Dividends paid
    
    
    (135,377
    )
    
    
    (144,031
    )
    
    
    (31,100
    )Cash used in financing activities
    
    
    (133,967
    )
    
    
    (170,793
    )
    
    
    (98,078
    )Effect of inflation and devaluation on cash
    
    
    
    
    
    
    (1,047
    )
    
    
    (8,270
    )(Decrease) increase in cash
    
    
    (50,195
    )
    
    
    (24,348
    )
    
    
    6,114Cash and cash equivalents at beginning of the year (1)
    
    
    56,940
    
    
    
    81,288
    
    
    
    75,174Cash and cash equivalents at end of the year (1)
    
    
    6,745
    
    
    
    56,940
    
    
    
    81,288
 (1)
    
    Cash plus current investments with original maturities of three months or less.   F-128




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REFINERÍA DEL NORTE S.A.
 
 NOTES TO THE FINANCIAL STATEMENTS
 AS OF DECEMBER 31, 2005
  1.
    
    COMPANY INCORPORATION AND ACTIVITYRefinería del Norte S.A. (the Company or Refinor) was organized to engage in the
industrialization of liquid and/or gas hydrocarbons and the direct and indirect by-products
thereof through the commercial exploitation of the Campo Durán business unit, which includes the
Campo Durán distillery, the Campo Durán-Montecristo multiple pipeline, the Güemes and Tucumán
storage plants, as well as the retail distribution of its products through a service center
network.According to the by-laws, the holders of class A shares, owning 50% of the capital stock, are
in charge of the operation of the Companys assets through 2018, being jointly and severally
liable for the related obligations.
 2.
    
    SIGNIFICANT ACCOUNTING POLICIES
 I.
    
    Generally accepted accounting principles
         F-129




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II.
    
    Restatement into constant currencyGenerally accepted accounting principles in Argentina establish that the financial statements
should be stated in constant currency. Within a monetary stability context, the nominal
currency is used as constant currency; however, during inflationary or deflationary periods,
financial statements are required to be restated into constant currency recognizing the
variations in the domestic wholesale price index, in conformity with the restatement method
established by the Argentina Federation of Professional Councils in Economic Sciences
Technical Resolution No 6.These financial statements recognize the effects of the changes in Argentina peso purchasing
power through February 28, 2003, as required by Presidential Decree No. 664/2003 and IGJ
(Argentina regulatory agency of business associations) General Resolution No. 4/2003.
 Valuation methods
  a)
    
    Cash and investments:Cash and certificates of deposit in local currency: at nominal value.Cash and certificates of deposit in foreign currency: at nominal value,
converted at the prevailing exchange rates at each year-end. Foreign exchange
differences were charged to the statement of income for each year.Mutual funds: at market prices as of each year-end.Non-current investment in subsidiary: it includes the 100% interest in the capital stock
of Refinor Internacional S.A., a company organized in Bolivia and acquired by Refinor in
October, 2005, by the holding of 6 registered shares of common stock, face value USD 166
per share. This company closes its fiscal year on December 31 and it has not been engaged
in any transactions during the 2005 fiscal year. As of December 31, 2005, its
shareholders equity amounted to 3. This investment was valued by the equity method using
Management information available as of year-end. The Companys Management decided not to
file consolidated financial statements considering the scarce significance of the amounts
involved.Current investments include financial income (expense) accrued as of each year-end.b)
    
    Trade receivables and accounts payable:Trade receivables and accounts payable were valued at the estimated price used in spot
transactions upon each transaction plus the relevant portion of accrued financial income
(expense).Receivables and payables in foreign currency were converted into Argentina pesos at the
prevailing exchange rates at each year-end for the settlement of these transactions.Trade receivables were valued net of an allowance for doubtful accounts. Upon estimating
the amounts the Companys Management considered the likelihood of occurrence based on the
judgment elements available and the legal counsels opinion.c)
    
    Loans:Loans were valued according to the amount of money received, including the relevant
portion of financial expense accrued. Payables in foreign currency were converted into
Argentina pesos at the prevailing exchange rates at each year-end for the settlement of
these transactions.
  F-130




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##### Table of Contents



d)
    
    Other receivables and payables (except contingencies):Receivables from and payables to third parties, except for those indicated in sections
(b) and (c) above, were valued on the basis of the amount to be collected and paid,
respectively, discounted in the relevant cases. Receivables from and payables to related
companies were valued at nominal value plus accrued financial income (expense).e)
    
    Inventories:Crude oil and refined products: at replacement or reproduction cost, as applicable.Materials and spare parts: of high turnover, at replacement cost; of low turnover, at the
last purchase price restated as indicated in note 2.II.Advances to suppliers: valued on the basis of the amounts of money delivered. The amounts
in foreign currency were converted at the prevailing exchange rates at each year end for
the settlement of these transactions.The value of inventories, thus obtained, does not exceed its recoverable value.f)
    
    Property, plant and equipment:Transferred assets: The total value was assessed on the basis of the price effectively
paid for the majority shareholding under competitive bidding (70% of capital stock),
restated as indicated in note 2.II. Such value was pro-rated among the different assets
obtained on the basis of the technical residual value thereof estimated by independent
experts. The amounts thus assessed are net of the related accumulated depreciation
calculated by the straight-line method on the basis of the remaining useful life
estimated by the experts mentioned above.Additions subsequent to the transfer date: valued at acquisition cost restated as
indicated in note 2.II including, if applicable, the cost related to the financing
thereof less the related accumulated depreciation calculated by the straight-line method
on the basis of the estimated useful life.Advances to suppliers: valued on the basis of the amounts of money delivered.The valuation of property, plant and equipment does not exceed the related recoverable
value.g)
    
    Intangible assets:Related to disbursements made to gas stations owners in connection with agreements of
branding of gas stations. They were valued on the basis of the amount of money delivered
restated as mentioned in note 2.II less the related accumulated amortization, calculated
considering a five-year useful life, which is the term of the agreements.The valuation of intangible assets does not exceed the related recoverable value.h)
    
    Income tax, minimum presumed income tax and VAT:The Company recognized the income tax charge based on the deferred tax method, thus
recognizing the temporary differences between the book- and tax-purposes measurements of
assets and liabilities. The tax
rate expected to be effective upon the reversal or use of deferred assets and liabilities
was applied on the temporary differences identified in order to determine such assets and
liabilities, considering current legal regulations issued as of the date of issuance of
these financial statements.As of December 31, 2005, the Company recognized deferred tax assets since the future
recoverability thereof has been evaluated as probable.
  F-131




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In addition, the Company determines minimum presumed income tax by applying the effective
1% rate to the computable assets at year-end. This tax is supplementary to income tax.
The Companys tax obligation for each tax year shall be the higher of these two taxes.
However, should minimum presumed income tax exceed income tax in a given tax year, such
excess may be computed as payment on account of any income tax excess over minimum
presumed income tax that could occur in any of the ten subsequent years.As of December 31, 2005, the income tax amount calculated exceeded minimum presumed
income tax. Note 3.I to these financial statements discloses the changes and breakdown of
income tax and deferred tax accounts.The Companys sales on the domestic market are subject to valued added tax (VAT) at the
general 21% rate. However, as provided for in Law No. 26,020, effective April 17, 2005,
propane, butane, and LPG sales on the domestic market were subject to a differential
10.5% rate.i)
    
    Contingencies:Certain conditions may exist as of the date of financial statements which may result in a
loss to the Company, but which will only be resolved when one or more future events occur
or fail to occur. Such contingent liabilities are assessed by the Companys management
based on the opinion of its legal counsel and the available evidence.Such contingencies include outstanding lawsuits or claims for possible damages to third
parties in the ordinary course of the Companys business, as well as third party claims
arising from disputes concerning the interpretation of legislation.If the assessment of a contingency indicates that it is probable that a loss has been
incurred and the amount of the loss can be estimated, a liability is accrued in the
Other liabilities account. If the assessment indicates that a potential loss
contingency is not probable, but is reasonably possible, or is probable but cannot be
estimated, then the nature of the contingent liability, together with an estimate of the
possibility of occurrence, is disclosed in a note to the financial statements. Loss
contingencies considered remote are not disclosed unless they involve guarantees, in
which case the nature of the guarantee is disclosed.j)
    
    Shareholders equity accounts:These accounts have been restated as mentioned in Note 2.II, except for the Capital
stock account, which has been kept at original value. The adjustment resulting from
such restatement is disclosed under the caption Adjustment to capital stock.k)
    
    Statement of income accounts:Restated into constant currency according to Note 2.ll, considering the following:The charges for consumption of non-monetary assets were determined based on the restated
values of such assets.Financial income (expense) and holding gains (losses) are broken down between those
generated by assets and those generated by liabilities and they include nominal financial
income and expense, foreign exchange differences, the effects of inflation on monetary
assets and liabilities and other holding gains (losses).
  F-132




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##### Table of Contents



3.
    
    BREAKDOWN OF MAIN ACCOUNTS
  Unaudited2005
    
    
    2004a) Investments:Current:Certificates of deposit
    
    
    3,094
    
    
    
    3,293Mutual funds
    
    
    1,350
    
    
    
    52,082Government securities
    
    
    
    
    
    
    3214,444
    
    
    
    55,696b) Trade receivables:Current:Common receivables
    
    
    27,329
    
    
    
    24,831Receivables under litigation
    
    
    7,331
    
    
    
    7,823Shareholder companies: Petrobras Energía S.A.
    
    
    40,760
    
    
    
    17,291 YPF S.A.
    
    
    26,343
    
    
    
    29,996 Pluspetrol S.A.
    
    
    13,851
    
    
    
    4,525Related companies: Repsol YPF Trading y Transporte S.A.
    
    
    44,908
    
    
    
    37,542 Petrobras Bolivia Distribución S.A.
    
    
    21,400
    
    
    
    16,027 Pluspetrol Energy S.A.
    
    
    43
    
    
    
    49181,965
    
    
    
    138,084Less: Allowance for doubtful accounts (Exhibit V)
    
    
    (6,456
    )
    
    
    (6,444
    )175,509
    
    
    
    131,640c) Other receivables:Current:VAT credit
    
    
    54,171
    
    
    
    17,931Tax on diesel oil transfer or import credit
    
    
    2,292
    
    
    
    Prepaid insurance
    
    
    1,799
    
    
    
    2,761Advances to suppliers
    
    
    760
    
    
    
    2,125Court deposit
    
    
    660
    
    
    
    3,594Loans and advances to personnel
    
    
    335
    
    
    
    417Turnover tax credit
    
    
    296
    
    
    
    383Prepaid expenses
    
    
    88
    
    
    
    314Notes receivable
    
    
    899
    
    
    
    447Less: Allowance for doubtful accounts (Exhibit V)
    
    
    (404
    )
    
    
    (442
    )Shareholder company  Pluspetrol S.A. (Note 3.k.2)
    
    
    2,981
    
    
    
    Other
    
    
    2,106
    
    
    
    1,48465,983
    
    
    
    29,014
  F-133




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##### Table of Contents



Unaudited2005
    
    
    2004Non-current:Deferred tax assets (Note 3.I)
    
    
    2,956
    
    
    
    5,157Turnover tax credit
    
    
    2,739
    
    
    
    897Notes receivable
    
    
    1,111
    
    
    
    2,284Shareholder company  Pluspetrol S.A. (Note 3.k.2)
    
    
    2,629
    
    
    
    Other
    
    
    441
    
    
    
    5099,876
    
    
    
    8,847d) Inventories:Refined products
    
    
    63,627
    
    
    
    60,818Materials and spare parts
    
    
    20,961
    
    
    
    22,175Allowance for materials impairment (Exhibit V)
    
    
    (4,218
    )
    
    
    (4,218
    )Crude oil
    
    
    23,611
    
    
    
    14,901Advances to suppliers
    
    
    138
    
    
    
    248Other
    
    
    918
    
    
    
    902105,037
    
    
    
    94,826e) Accounts payable:Common suppliers
    
    
    120,822
    
    
    
    96,861Shareholder companies: YPF S.A.
    
    
    74,983
    
    
    
    74,218 Petrobras Energía S.A.
    
    
    22,944
    
    
    
    15,164 Pluspetrol S.A.
    
    
    4,496
    
    
    
    3,341Related companies: Pluspetrol Energy S.A.
    
    
    1,633
    
    
    
    1,076 Pluspetrol Bolivia Corporation S.A.
    
    
    26
    
    
    
    14224,904
    
    
    
    190,674f) Loans:Short-term bank loans
    
    
    77,303
    
    
    
    75,893Interest payable
    
    
    2,265
    
    
    
    1,39879,568
    
    
    
    77,291g) Taxes payable:Income tax, net of prepayments and withholdings
    
    
    25,402
    
    
    
    32,080Tax on fuel transfers
    
    
    812
    
    
    
    2,801Other withholdings
    
    
    5,012
    
    
    
    4,629Tax on diesel oil transfer or import
    
    
    
    
    
    
    776Other
    
    
    292
    
    
    
    53431,518
    
    
    
    40,820
  F-134




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##### Table of Contents



Income (Loss)Unaudited2005
    
    
    2004
    
    
    2003h) Net sales:Gross sales (1)
    
    
    1,462,820
    
    
    
    1,115,978
    
    
    
    901,772Withholdings on exports (2)
    
    
    (33,709
    )
    
    
    (25,438
    )
    
    
    (20,092
    )1,429,111
    
    
    
    1,090,540
    
    
    
    881,680
 (1)
    
    Sales for the fiscal year ended December 31, 2005, made mainly to Repsol YPF Trading y Transporte S.A.,
YPF S.A., Petrobras Energía S.A., Petrobras Bolivia Distribución S.A., and Compañía Petrolera Nacional
Ltda. (Bolivia), represented about 37%, 12%, 7%, 9%, and 8%, respectively, of total gross sales.(2)
    
    The Argentina Government implemented a withholding on exports system amounting to 5% of hydrocarbons
by-products and 20% of LPG exports. Unaudited2005
    
    
    2004
    
    
    2003i) Cost of sales:Inventories in stock at beginning of year
    
    
    108,551
    
    
    
    120,330
    
    
    
    99,098Purchase of goods and services
    
    
    993,035
    
    
    
    685,218
    
    
    
    598,350Operating expenses (Exhibit II)
    
    
    76,725
    
    
    
    59,352
    
    
    
    48,496Inventory holding gains (losses) (Note 3.j)
    
    
    14,388
    
    
    
    11,060
    
    
    
    (5,706
    )Plant idle capacity
    
    
    (677
    )
    
    
    (683
    )
    
    
    (2,025
    )Less: Inventories in stock at end of year
    
    
    (123,611
    )
    
    
    (108,551
    )
    
    
    (120,330
    )1,068,411
    
    
    
    766,726
    
    
    
    617,883
 Income (Loss)Unaudited2005
    
    
    2004
    
    
    2003j) Financial income (expense) and holding gains (losses)From assets:Due to foreign exchange differences
    
    
    420
    
    
    
    (14,779
    )
    
    
    (33,219
    )Inventory holding gains (losses)
    
    
    14,388
    
    
    
    11,060
    
    
    
    (5,706
    )Loss due to inflation exposure
    
    
    
    
    
    
    
    
    
    
    (1,955
    )Interest accrued
    
    
    3,118
    
    
    
    3,594
    
    
    
    1,054Other
    
    
    335
    
    
    
    (16
    )
    
    
    668Subtotal from assets
    
    
    18,261
    
    
    
    (141
    )
    
    
    (39,158
    )From liabilities:Due to foreign exchange differences
    
    
    (2,918
    )
    
    
    14,883
    
    
    
    39,679Interest accrued
    
    
    (7,554
    )
    
    
    (8,337
    )
    
    
    (10,291
    )Commissions and other bank expenses
    
    
    (1,095
    )
    
    
    (1,666
    )
    
    
    (2,824
    )Gain due to inflation exposure
    
    
    
    
    
    
    
    
    
    
    2,791Subtotal from liabilities
    
    
    (11,567
    )
    
    
    4,880
    
    
    
    29,355Total
    
    
    6,694
    
    
    
    4,739
    
    
    
    (9,803
    )
  F-135




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Income (Loss)Unaudited2005
    
    
    2004
    
    
    2003k) Other income, net:Reestimation of provisions and reserves
    
    
    (3,954
    )
    
    
    3,222
    
    
    
    1,847Reversal of insurance  Lavallen claim (1)
    
    
    
    
    
    
    
    
    
    
    2,377Reversal of doubtful accounts accrual
    
    
    
    
    
    
    
    
    
    
    462Compensation for contractual breach (2)
    
    
    8,519
    
    
    
    
    
    
    
    Other
    
    
    (471
    )
    
    
    (394
    )
    
    
    (1,667
    )Total
    
    
    4,094
    
    
    
    2,828
    
    
    
    3,019
 (1)
    
    Corresponds to the amount recognized by the assurance company for the remediation
made because of a spilling of hydrocarbons.(2)
    
    The shareholder company Pluspetrol S.A. breached certain contractual commitments
related to rich gas supply to the Company. On April 14, 2005, both companies signed
an agreement whereby Pluspetrol S.A. recognized that the Company carried a USD 2,950
receivable in this regard, which is settled by offsetting it with the obligations
resulting from rich gas purchases by Refinor S.A. to the abovementioned company over a
maximum 36-month term. Non-compensated differences, if any, are assessed and paid in
cash in the periods established in the agreement.  The breakdown of income tax included in the statement of income and its
reconciliation with the one that would result from applying the current 35% rate on
book income before income tax are disclosed below:
 Income (Loss)Unaudited2005
    
    
    2004
    
    
    2003Estimated tax payable
    
    
    (92,731
    )
    
    
    (80,458
    )
    
    
    (61,871
    )Changes in nominal deferred tax
    
    
    (2,470
    )
    
    
    (2,577
    )
    
    
    (741
    )Total income tax
    
    
    (95,201
    )
    
    
    (83,035
    )
    
    
    (62,612
    )Income for the year before income tax
    
    
    255,441
    
    
    
    223,737
    
    
    
    160,539Effective tax rate
    
    
    35
    %
    
    
    35
    %
    
    
    35
    %(89,404
    )
    
    
    (78,308
    )
    
    
    (56,189
    )Permanent differences at tax rate:- Restatement into constant pesos
    
    
    (4,288
    )
    
    
    (5,350
    )
    
    
    (5,913
    )- Other
    
    
    (1,509
    )
    
    
    623
    
    
    
    (510
    )Total income tax
    
    
    (95,201
    )
    
    
    (83,035
    )
    
    
    (62,612
    )
  F-136




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##### Table of Contents



Unaudited2005
    
    
    2004Asset differences- Deferred foreign exchange difference
    
    
    1,848
    
    
    
    6,407- Non-deductible allowances
    
    
    3,125
    
    
    
    2,651- Other, not individually significant
    
    
    2,971
    
    
    
    1,512Liability differences- Valuation of inventories
    
    
    (4,988
    )
    
    
    (5,413
    )2,956
    
    
    
    5,157
 4.
    
    MAIN COMMITMENTS ASSUMED BY THE COMPANY AND CONTINGENCIESCommitmentsThe Company assumed different purchase commitments for crude and condensed oil and natural gas
by-products at prices adjusted by a variable scale based on the international WTI price
(periodically checked according to domestic market changes) for crude and condensed oil, and the
basin price published by the Enargas for natural gas by-products. The amounts of purchase
obligations, calculated on the basis of future estimated prices and the expected volumes for the
coming years are:
 Millions of Argentina pesosNatural gas by-Condensed and crude oil
    
    
    products2006
    
    
    241
    
    
    
    832007
    
    
    93
    
    
    
    822008
    
    
    82
    
    
    
    722009
    
    
    80
    
    
    
    712010 and subsequent years
    
    
    38
    
    
    
    180534
    
    
    
    488
 The Company assumed different sales commitments of virgin gasoline, diesel oil and natural gas
by-products. The amounts of sale obligations, calculated on the basis of future estimated prices
and the expected volumes for the coming years are:
 Millions of Argentine pesosVirgin
    
    
    
    
    
    
    Natural gas by-Year
    
    gasoline
    
    
    Diesel Oil
    
    
    products2006
    
    
    418
    
    
    
    260
    
    
    
    1702007
    
    
    134
    
    
    
    243
    
    
    
    1702008
    
    
    
    
    
    
    54
    
    
    
    42552
    
    
    
    557
    
    
    
    382
 A total amount of 48% and 88% of the purchase and sale commitments, respectively, mentioned
above were executed with shareholders and related companies.On December 24, 2004, the Energy Department issued Resolution No. 1679/2004 which, among other
issues, required that market agents report all diesel oil export transactions for prior approval
providing evidence that the demand of the whole commercial chain, both retail and wholesale,
identified with a brand or refinery, or not, is appropriately met or that domestic demand has
been granted the possibility of acquiring diesel oil. This evidence should be included in a
declaration with minimum contents established by the abovementioned resolution. As of the date
of issuance of these financial statements, the Companys Management obtained the related exports
permits and it is currently evaluating the commercial procedures that it will use to meet
effective contracts.
  F-137




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##### Table of Contents



LawsuitsThe Company is a party to a criminal lawsuit resulting from its reporting with the ANA
(Argentina Customs Administration) in connection with gasoline sales to Paraguay in 1996 and in
connection with which two Company customers and a transportation company are being investigated.
As of the date of issuance of these financial statements, the lawsuit is at the pre-trial
investigation stage and, based on the Companys participation in good faith and according to its
legal counsel, a favorable outcome is expected.On September 20, 2001, and in connection with the criminal lawsuit related to gasoline sales to
Paraguay mentioned above, the DGI (Argentina tax bureau) notified the assessment of the tax on
fuel transfers and VAT allegedly omitted in such transactions in the amount of about 1,400 and
possible fines and interest. Having the Company filed a brief with the DGI on October 17, 2001,
such agency reasserted its collection intention on December 14, 2001.In 2000, the DGR (provincial tax authorities) of the Province of Tucumán assessed a turnover tax
charge larger than the one calculated by the Company by 1,400 and interest in the amount of
1,600, and potential fines from a difference in the tax rate applied to calculate the
abovementioned tax. On May 10, 2004, the Company, jointly with other companies operating in the
province, executed an agreement with the Government of the Province of Tucumán to conclude the
administrative and legal actions existing at present or that could occur in the future, whereby
the parties give up the actions filed duly and waive any right to claim or appeal the amounts
paid in connection with the collection intention for the fiscal years prior to December 31,
2003, related to such claim.In addition, during the fiscal year ended December 31, 2003, the Company received an estimation
from the AFIP (Federal Public Revenue Agency) claiming the payment of the diesel oil rate for
the exports of such fuel for the period beginning July 2001 through February 2003. The amount
claimed totaled 21,646 plus potential interest and fines. On June 15, 2005, the AFIP revoked the
abovementioned claim.Also, during fiscal year 2005, the Company received claims from the DGR of the Provinces of
Salta and Jujuy in connection with differences in turnover tax calculations in the amounts of
about 43,273 and 504, respectively, plus potential interest and fines resulting from differences
in the tax category of the Companys activities. As of the date of issuance of these financial
statements, the Company filed briefs with the abovementioned provincial agencies.Finally, as of the date of issuance of these financial statements certain other lawsuits were in
progress in connection with the Companys operations.Based on the opinion of its legal counsel and tax advisors, the Company estimated that the final
outcome of the lawsuits mentioned above will not have a material adverse effect on the Companys
financial position and results of operations.
  F-138




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##### Table of Contents



5.
    
    TRANSACTIONS WITH SHAREHOLDER COMPANIES AND RELATED COMPANIES
  Unaudited2005
    
    
    2004
    
    
    2003Sale of products and services:Shareholder companies: YPF S.A.
    
    
    167,713
    
    
    
    152,317
    
    
    
    124,870 Pluspetrol S.A.
    
    
    40,171
    
    
    
    32,156
    
    
    
    20,880 Petrobras Energía S.A.
    
    
    122,338
    
    
    
    77,384
    
    
    
    57,339Related companies: Repsol YPF Trading y Transporte S.A.
    
    
    528,254
    
    
    
    380,716
    
    
    
    287,265 Petrobras Bolivia Distribución S.A.
    
    
    118,834
    
    
    
    57,411
    
    
    
    49,731 Pluspetrol Energy S.A.
    
    
    448
    
    
    
    396
    
    
    
    413 Pluspetrol Bolivia Corporation S.A.
    
    
    24
    
    
    
    45
    
    
    
     Repsol Gas S.A.
    
    
    
    
    
    
    111
    
    
    
    3,468977,782
    
    
    
    700,536
    
    
    
    543,966Purchases of products and services:Shareholder companies: YPF S.A.
    
    
    315,059
    
    
    
    286,730
    
    
    
    269,838 Petrobras Energía S.A.
    
    
    78,838
    
    
    
    43,080
    
    
    
    39,879 Pluspetrol S.A.
    
    
    37,746
    
    
    
    35,859
    
    
    
    20,595 Petrobras Energía S.A  Fees to
the operator (1)
    
    
    3,031
    
    
    
    2,974
    
    
    
    2,933Related companies: Empresa Petrolera Andina S.A.
    
    
    151,182
    
    
    
    30,024
    
    
    
     Pluspetrol Bolivia Corporation S.A.
    
    
    8,681
    
    
    
    5,353
    
    
    
    1,312 Pluspetrol Energy S.A.
    
    
    11,776
    
    
    
    11,060
    
    
    
    13,638606,313
    
    
    
    415,080
    
    
    
    348,195
  Unaudited2005
    
    
    2004
    
    
    2003Other transactions:Shareholder company  Pluspetrol S.A.:Compensation for contractual breach
    
    
    8,519
    
    
    
    
    
    
    
    8,519
    
    
    
    
    
    
    
    
 6.
    
    CAPITAL STOCK BREAKDOWN AND RETAINED EARNINGS RESTRICTION
  SharesClass
    
    NumberPetrobras Energía S.A.
    
    A
    
    
    26,108,078Pluspetrol S.A.
    
    A
    
    
    19,695,577YPF S.A.
    
    B
    
    
    45,803,655Total
    
    
    
    
    91,607,310
  F-139




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##### Table of Contents



AGREEMENT WITH OIL AND GAS COMPANIES
   8.
    
    SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED BY THE COMPANY AND
US GAAP
       F-140




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F-141




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EXHIBIT I
 REFINERÍA DEL NORTE S.A.
CHANGES IN PROPERTY, PLANT AND EQUIPMENT AS OF DECEMBER 31, 2005, 2004 AND 2003
 2005Original costMain account
    
    At beginning
    
    
    Additions
    
    
    Transfers
    
    
    Decreases
    
    
    At endGas stations
    
    
    18,077
    
    
    
    
    
    
    
    1,380
    
    
    
    
    
    
    
    19,457Buildings and construction
    
    
    16,429
    
    
    
    
    
    
    
    1,750
    
    
    
    (506
    )
    
    
    17,673Compression plant equipment and facilities
    
    
    2,895
    
    
    
    
    
    
    
    23
    
    
    
    
    
    
    
    2,918Pumping stations equipment and facilities
    
    
    23,748
    
    
    
    
    
    
    
    83
    
    
    
    
    
    
    
    23,831Multiple pipeline equipment and facilities
    
    
    127,552
    
    
    
    
    
    
    
    6,926
    
    
    
    (309
    )
    
    
    134,169Refinery equipment and facilities
    
    
    316,154
    
    
    
    
    
    
    
    25,159
    
    
    
    
    
    
    
    341,313Tools
    
    
    3,922
    
    
    
    104
    
    
    
    
    
    
    
    (4
    )
    
    
    4,022Software
    
    
    14,937
    
    
    
    989
    
    
    
    
    
    
    
    (42
    )
    
    
    15,884Furniture and office supplies
    
    
    5,073
    
    
    
    451
    
    
    
    
    
    
    
    (7
    )
    
    
    5,517Vehicles
    
    
    5,178
    
    
    
    
    
    
    
    
    
    
    
    (150
    )
    
    
    5,028Storage and dispatch units
    
    
    44,355
    
    
    
    
    
    
    
    193
    
    
    
    
    
    
    
    44,548Works in process
    
    
    20,458
    
    
    
    28,063
    
    
    
    (22,155
    )
    
    
    
    
    
    
    26,366Plots of land
    
    
    3,705
    
    
    
    
    
    
    
    
    
    
    
    (56
    )
    
    
    3,649Advances to suppliers
    
    
    1,557
    
    
    
    4,371
    
    
    
    (3,989
    )
    
    
    
    
    
    
    1,939Materials and spare parts
    
    
    5,123
    
    
    
    9,175
    
    
    
    (9,370
    )
    
    
    
    
    
    
    4,928Total as of 12/31/2005
    
    
    609,163
    
    
    
    43,153
    
    
    
    
    
    
    
    (1,074
    )
    
    
    651,242Total as of 12/31/2004 (Unaudited)
    
    
    569,695
    
    
    
    46,750
    
    
    
    
    
    
    
    (7,282
    )
    
    
    609,163Total as of 12/31/2003 (Unaudited)
    
    
    538,466
    
    
    
    44,338
    
    
    
    
    
    
    
    (13,109
    )
    
    
    569,695
  F-142




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##### Table of Contents



2004
    
    
    20032005
    
    
    (Unaudited)
    
    
    (Unaudited)Accumulated depreciationFor the year
    
    
    
    
    
    
    Net book
    
    
    Net book
    
    
    Net bookMain account
    
    At beginning
    
    
    Rate %
    
    
    Amount
    
    
    Decreases
    
    
    At end
    
    
    Value
    
    
    Value
    
    
    ValueGas stations
    
    
    7,930
    
    
    
    4 to 7
    
    
    
    1,333
    
    
    
    
    
    
    
    9,263
    
    
    
    10,194
    
    
    
    10,147
    
    
    
    10,640Buildings and construction
    
    
    5,308
    
    
    
    2 to 10
    
    
    
    828
    
    
    
    (206
    )
    
    
    5,930
    
    
    
    11,743
    
    
    
    11,121
    
    
    
    12,912Compression plant equipment
and facilities
    
    
    52
    
    
    
    3 to 7
    
    
    
    117
    
    
    
    
    
    
    
    169
    
    
    
    2,749
    
    
    
    2,843
    
    
    
    Pumping stations equipment
and facilities
    
    
    8,462
    
    
    
    4 to 6
    
    
    
    1,056
    
    
    
    
    
    
    
    9,518
    
    
    
    14,313
    
    
    
    15,286
    
    
    
    16,214Multiple pipeline equipment
and facilities
    
    
    50,022
    
    
    
    2 to 6
    
    
    
    4,764
    
    
    
    (245
    )
    
    
    54,541
    
    
    
    79,628
    
    
    
    77,530
    
    
    
    74,385Refinery equipment and
facilities
    
    
    138,409
    
    
    
    4 to 10
    
    
    
    21,738
    
    
    
    
    
    
    
    160,147
    
    
    
    181,166
    
    
    
    177,745
    
    
    
    188,894Tools
    
    
    3,474
    
    
    
    9 to 20
    
    
    
    200
    
    
    
    (4
    )
    
    
    3,670
    
    
    
    352
    
    
    
    448
    
    
    
    559Software
    
    
    11,316
    
    
    
    10 to 33
    
    
    
    1,445
    
    
    
    (28
    )
    
    
    12,733
    
    
    
    3,151
    
    
    
    3,621
    
    
    
    4,077Furniture and office supplies
    
    
    4,741
    
    
    
    10 to 20
    
    
    
    224
    
    
    
    (6
    )
    
    
    4,959
    
    
    
    558
    
    
    
    332
    
    
    
    620Vehicles
    
    
    3,976
    
    
    
    20
    
    
    
    404
    
    
    
    (109
    )
    
    
    4,271
    
    
    
    757
    
    
    
    1,202
    
    
    
    1,608Storage and dispatch units
    
    
    12,849
    
    
    
    4 to 10
    
    
    
    1,869
    
    
    
    
    
    
    
    14,718
    
    
    
    29,830
    
    
    
    31,506
    
    
    
    29,239Works in process
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,366
    
    
    
    20,458
    
    
    
    3,943Plots of land
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,649
    
    
    
    3,705
    
    
    
    3,800Advances to suppliers
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,939
    
    
    
    1,557
    
    
    
    82Materials and spare parts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,928
    
    
    
    5,123
    
    
    
    4,560Total as of 12/31/2005
    
    
    246,539
    
    
    
    
    
    
    
    33,978
    
    
    
    (598
    )
    
    
    279,919
    
    
    
    371,323Total as of 12/31/2004
(Unaudited)
    
    
    218,162
    
    
    
    
    
    
    
    32,878
    
    
    
    (4,501
    )
    
    
    246,539
    
    
    
    
    
    
    
    362,624Total as of 12/31/2003
(Unaudited)
    
    
    195,867
    
    
    
    
    
    
    
    28,192
    
    
    
    (5,897
    )
    
    
    218,162
    
    
    
    
    
    
    
    
    
    
    
    351,533
  F-143




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##### Table of Contents



EXHIBIT II
 REFINERÍA DEL NORTE S.A.
 INFORMATION REQUIRED UNDER SECTION 64 (1) b OF LAW No. 19,550
FOR THE FISCAL YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
 Unaudited2003
    
    
    2004
    
    
    2005Operating
    
    
    Administrative
    
    
    SellingAccounts
    
    
    
    
    
    
    
    
    
    Total
    
    
    expenses
    
    
    expenses
    
    
    expensesPayroll and social security taxes
    
    
    17,264
    
    
    
    20,367
    
    
    
    27,548
    
    
    
    4,604
    
    
    
    11,568
    
    
    
    11,376Other employee benefits
    
    
    3,320
    
    
    
    4,051
    
    
    
    3,730
    
    
    
    479
    
    
    
    1,897
    
    
    
    1,354Taxes, charges and contributions
    
    
    14,179
    
    
    
    14,737
    
    
    
    15,785
    
    
    
    366
    
    
    
    8,576
    
    
    
    6,843Depreciation of property, plant
and equipment
    
    
    28,192
    
    
    
    32,878
    
    
    
    33,978
    
    
    
    23,214
    
    
    
    925
    
    
    
    9,839Intangible assets amortization
    
    
    890
    
    
    
    872
    
    
    
    922
    
    
    
    
    
    
    
    
    
    
    
    922Maintenance expenses
    
    
    12,834
    
    
    
    8,859
    
    
    
    12,246
    
    
    
    5,753
    
    
    
    791
    
    
    
    5,702Transportation and storage expenses
    
    
    18,457
    
    
    
    22,226
    
    
    
    25,909
    
    
    
    
    
    
    
    
    
    
    
    25,909Electric power, fuels and
lubricants and other
    
    
    10,767
    
    
    
    19,638
    
    
    
    30,994
    
    
    
    28,945
    
    
    
    66
    
    
    
    1,983Consumption of materials and spare
parts
    
    
    4,843
    
    
    
    6,465
    
    
    
    6,189
    
    
    
    3,792
    
    
    
    427
    
    
    
    1,970Insurance
    
    
    7,210
    
    
    
    5,142
    
    
    
    5,771
    
    
    
    4,770
    
    
    
    834
    
    
    
    167Works and other services contracted
    
    
    8,550
    
    
    
    11,198
    
    
    
    12,778
    
    
    
    4,467
    
    
    
    3,315
    
    
    
    4,996Communications
    
    
    2,048
    
    
    
    2,148
    
    
    
    2,215
    
    
    
    135
    
    
    
    623
    
    
    
    1,457Traveling and living expenses
    
    
    901
    
    
    
    1,254
    
    
    
    1,180
    
    
    
    47
    
    
    
    641
    
    
    
    492Advertising
    
    
    2,736
    
    
    
    2,904
    
    
    
    2,563
    
    
    
    
    
    
    
    
    
    
    
    2,563Professional fees
    
    
    4,321
    
    
    
    4,730
    
    
    
    4,802
    
    
    
    55
    
    
    
    4,507
    
    
    
    240Other
    
    
    5,243
    
    
    
    6,063
    
    
    
    5,010
    
    
    
    98
    
    
    
    1,814
    
    
    
    3,098Total 2005
    
    
    
    
    
    
    
    
    
    
    191,620
    
    
    
    76,725
    
    
    
    35,984
    
    
    
    78,911Total 2004 (Unaudited)
    
    
    
    
    
    
    163,532
    
    
    
    
    
    
    
    59,352
    
    
    
    31,364
    
    
    
    72,816Total 2003 (Unaudited)
    
    
    141,755
    
    
    
    
    
    
    
    
    
    
    
    48,496
    
    
    
    28,202
    
    
    
    65,057
  F-144




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EXHIBIT III
 REFINERÍA DEL NORTE S.A.
 ASSETS AND LIABILITIES IN FOREIGN CURRENCY
AS OF DECEMBER 31, 2005 AND 2004
 2004 (Unaudited)
    
    
    2005Effective
    
    
    Booked amountCurrency and
    
    
    Currency and
    
    
    exchange
    
    
    in thousands ofItem
    
    amount
    
    
    amount
    
    
    rate
    
    
    Argentina pesosCURRENT ASSETSCash
    
    USD
    
    
    2
    
    
    USD
    
    
    3
    
    
    
    (a
    )
    
    
    3.0315
    
    
    
    9Investments
    
    USD
    
    
    16,312
    
    
    USD
    
    
    1,021
    
    
    
    (a
    )
    
    
    3.0315
    
    
    
    3,094Other receivables
    
    
    
    
    
    
    
    
    
    USD
    
    
    1,088
    
    
    
    (a
    )
    
    
    3.0315
    
    
    
    3,299Trade receivables
    
    USD
    
    
    10,447
    
    
    USD
    
    
    28,256
    
    
    
    (a
    )
    
    
    3.0315
    
    
    
    85,657Inventories  Advances to suppliers
    
    USD
    
    
    83
    
    
    USD
    
    
    45
    
    
    
    (a
    )
    
    
    3.0315
    
    
    
    138Total current assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    92,197NON-CURRENT ASSETSOther receivables
    
    
    
    
    
    
    
    
    
    USD
    
    
    867
    
    
    
    (a
    )
    
    
    3.0315
    
    
    
    2,629Total non-current assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,629Total assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    94,826CURRENT LIABILITIESAccounts payable
    
    USD
    
    
    21,528
    
    
    USD
    
    
    30,880
    
    
    
    (a
    )
    
    
    3.0315
    
    
    
    93,612Loans
    
    USD
    
    
    25,991
    
    
    USD
    
    
    26,247
    
    
    
    (a
    )
    
    
    3.0315
    
    
    
    79,568Total current liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    173,180
 (a)
    
    Benchmark exchange rate of the BCRA (Central Bank of Argentina).  F-145




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##### Table of Contents



EXHIBIT IV
 REFINERÍA DEL NORTE S.A.
 BREAKDOWN OF CURRENT INVESTMENTS, RECEIVABLES, LOANS AND OTHER
LIABILITIES AS OF DECEMBER 31, 2005
  Assets
    
    
    LiabilitiesCurrent
    
    
    
    
    
    
    
    
    
    
    OtherTerm
    
    investments
    
    
    Receivables
    
    
    Loans
    
    
    liabilitiesWith no maturity
    
    
    
    
    
    
    5,695
    (5)
    
    
    
    
    
    
    81,247
    (6)With maturityMatured:- Up to 3 months
    
    
    
    
    
    
    65,745
    
    
    
    
    
    
    
    19,720- From 3 to 6 months
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    418- From 6 to 9 months
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    164- From 9 to 12 months
    
    
    
    
    
    
    439
    
    
    
    
    
    
    
    433- From 1 to 2 years
    
    
    
    
    
    
    277
    
    
    
    
    
    
    
    349- Over 2 years
    
    
    
    
    
    
    12,931
    
    
    
    
    
    
    
    760Total matured
    
    
    
    
    
    
    79,393
    
    
    
    
    
    
    
    21,844To mature:- Up to 3 months
    
    
    4,444
    
    
    
    165,891
    
    
    
    78,436
    
    
    
    143,135- From 3 to 6 months
    
    
    
    
    
    
    206
    
    
    
    453
    
    
    
    28,432- From 6 to 9 months
    
    
    
    
    
    
    44
    
    
    
    679
    
    
    
    - From 9 to 12 months
    
    
    
    
    
    
    2,818
    
    
    
    
    
    
    
    - From 1 to 2 years
    
    
    
    
    
    
    3,332
    
    
    
    
    
    
    
    - Over 2 years
    
    
    
    
    
    
    4,141
    
    
    
    
    
    
    
    Total to mature
    
    
    4,444
    
    
    
    176,432
    
    
    
    79,568
    
    
    
    171,567Total with maturity
    
    
    4,444
    
    
    
    255,825
    
    
    
    79,568
    
    
    
    193,411Total
    
    
    4,444
    (1)
    
    
    261,520
    (2)
    
    
    79,568
    (3)
    
    
    274,658
    (4)
 (1)
    
    Accruing interest at a variable rate of about 3.76% per annum.(2)
    
    Receivables are disclosed excluding the allowance for doubtful accounts.
Approximately 94% does not accrue interest, accruing the rest, interest at a fixed rate.
The average weighted rate is approximately 6% per annum.(3)
    
    Loans accrue interest at a variable rate. The average weighted rate, including
taxes on interest, is approximately 4.24% per annum.(4)
    
    Not accruing interest, except for the accrual for purchase of raw material under
the agreement with oil & gas producing companies amounting to 69,595, accruing interest
at LIBOR.(5)
    
    Related to the balances of social contributions credit, turnover tax credit, and
deferred tax assets.(6)
    
    Related to reserves for contingencies and accrual for purchase of raw material
under the agreement with oil & gas producing companies.  F-146




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EXHIBIT V
 REFINERÍA DEL NORTE S.A.
 CHANGES IN ALLOWANCES AND RESERVES AS OF DECEMBER 31, 2005 AND 2004
  2005Balances atbeginning
    
    
    
    
    
    
    
    
    
    
    Balances atItem
    
    of year
    
    
    Increases
    
    
    Decreases
    
    
    end of yearDeducted from assets:- Allowance for doubtful accounts
    
    
    6,886
    
    
    
    
    
    
    
    26
    
    
    
    6,860- Allowance for materials  ́ impairment
    
    
    4,218
    
    
    
    
    
    
    
    
    
    
    
    4,218Total 2005
    
    
    11,104
    
    
    
    
    
    
    
    26
    (1)
    
    
    11,078Total 2004 (Unaudited)
    
    
    8,931
    
    
    
    2,173
    
    
    
    
    
    
    
    11,104Total 2003 (Unaudited)
    
    
    12,243
    
    
    
    
    
    
    
    3,312
    
    
    
    8,931Included in liabilities:- Non-current  Reserve for contingencies
    
    
    10,429
    
    
    
    2,878
    
    
    
    1,655
    
    
    
    11,652Total 2005
    
    
    10,429
    
    
    
    2,878
    (2)
    
    
    1,655
    (3)
    
    
    11,652Total 2004 (Unaudited)
    
    
    13,072
    
    
    
    9,625
    
    
    
    12,268
    
    
    
    10,429Total 2003 (Unaudited)
    
    
    5,557
    
    
    
    7,796
    
    
    
    281
    
    
    
    13,072
 (1)
    
    Used over the year.(2)
    
    Charge for the year allocated to Other income, net account in the statement of income.(3)
    
    Used over the year.  F-147




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##### Table of Contents



PETRORITUPANO S. A.
 (Subsidiary 60% owned by Corporación Venezolana del Petróleo, S.A.  CVP)
 Statements of Income
 Years ended December 31, 2007 and 2006
 (In thousands of U.S. dollars)
 UnauditedNote
    
    
    2007
    
    
    2006Sales of:Crude oil
    
    
    16
    
    
    
    793,140
    
    
    
    608,426Other
    
    
    
    
    
    
    662
    
    
    
    793,802
    
    
    
    608,426Costs and expenses:Operating expenses
    
    
    16
    
    
    
    84,419
    
    
    
    85,955Depreciation and amortization
    
    
    9
    
    
    
    58,337
    
    
    
    50,548Selling, administrative and general expenses
    
    
    16
    
    
    
    20,484
    
    
    
    11,009Royalties and other taxes
    
    
    8-b
    
    
    
    281,990
    
    
    
    205,864Other income, net
    
    
    
    
    
    
    (16,231
    )
    
    
    3,198428,999
    
    
    
    356,574Income before income tax
    
    
    
    
    
    
    364,803
    
    
    
    251,852Income tax
    
    
    8-a
    
    
    
    104,558
    
    
    
    95,302Net income
    
    
    
    
    
    
    260,245
    
    
    
    156,550
   F-148




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##### Table of Contents



PETRORITUPANO S. A.
 (Subsidiary 60% owned by Corporación Venezolana del Petróleo, S.A.  CVP)
 Balance Sheets
 December 31, 2007 and 2006
 (In thousands of U.S. dollars)
 UnauditedNote
    
    
    2007
    
    
    2006AssetsProperty, plant and equipment, net
    
    
    9
    
    
    
    439,623
    
    
    
    464,180Deferred tax assets
    
    
    8-a
    
    
    
    102,420
    
    
    
    45,236Recoverable value added tax
    
    
    8-c
    
    
    
    27,918
    
    
    
    7,545Total non-current assets
    
    
    
    
    
    
    569,961
    
    
    
    516,961Inventories of materials and supplies
    
    
    
    
    
    
    410
    
    
    
    743Accounts receivable from stockholders and related companies
    
    
    16
    
    
    
    879,185
    
    
    
    429,038Prepaid expenses and other
    
    
    10
    
    
    
    2,358
    
    
    
    Cash and cash equivalents
    
    
    3-f
    
    
    
    69,386
    
    
    
    6,707Total current assets
    
    
    
    
    
    
    951,339
    
    
    
    436,488Total assets
    
    
    
    
    
    
    1,521,300
    
    
    
    953,449Stockholders EquityStockholders equity, see statement of stockholders
equity
    
    
    11
    
    
    
    780,397
    
    
    
    638,668LiabilitiesNon-current account payable to PDVSA Petróleo, S.A.
    
    
    16
    
    
    
    2,933
    
    
    
    15,557Accrued and other liabilities, net of current portion
    
    
    13
    
    
    
    16,781
    
    
    
    13,841Total non-current liabilities
    
    
    
    
    
    
    19,714
    
    
    
    29,398Accounts payable
    
    
    15
    
    
    
    532,902
    
    
    
    120,127Dividends payable
    
    
    11-d
    
    
    
    71,110
    
    
    
    Accrued and other liabilities
    
    
    13
    
    
    
    109,010
    
    
    
    24,718Income tax payable
    
    
    8-a
    
    
    
    8,167
    
    
    
    140,538Total current liabilities
    
    
    
    
    
    
    721,189
    
    
    
    285,383Total liabilities
    
    
    
    
    
    
    740,903
    
    
    
    314,781Total liabilities and stockholders equity
    
    
    
    
    
    
    1,521,300
    
    
    
    953,449
   F-149




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##### Table of Contents



PETRORITUPANO S. A.
 (Subsidiary 60% owned by Corporación Venezolana del Petróleo, S.A.  CVP)
 Statements of Stockholders Equity
 December 31, 2007 and 2006
 (In thousands of U.S. dollars)
 Unaudited2007
    
    
    2006Capital
    
    
    
    
    
    
    Retained earningsstock
    
    
    Premium in
    
    
    
    
    
    
    
    
    
    
    Totalsubscribed
    
    
    issue of
    
    
    Legal
    
    
    
    
    
    
    retainedNote
    
    
    and paid
    
    
    shares
    
    
    reserve
    
    
    Unappropiated
    
    
    earnings
    
    
    Total
    
    
    TotalBalances at beginning of the year
    
    
    
    
    
    
    10,217
    
    
    
    471,901
    
    
    
    1,022
    
    
    
    155,528
    
    
    
    156,550
    
    
    
    638,668
    
    
    
    Capital stock paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    465Contribution of Stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    481,653Net income for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    260,245
    
    
    
    260,245
    
    
    
    260,245
    
    
    
    156,550Dividends paid
    
    
    11-d
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (118,516
    )
    
    
    (118,516
    )
    
    
    (118,516
    )
    
    
    Balances at end of the year
    
    
    
    
    
    
    10,217
    
    
    
    471,901
    
    
    
    1,022
    
    
    
    297,257
    
    
    
    298,279
    
    
    
    780,397
    
    
    
    638,668
   F-150




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##### Table of Contents



PETRORITUPANO S. A.
 (Subsidiary 60% owned by Corporación Venezolana del Petróleo, S.A.  CVP)
 Statements of Cash Flows
 Years ended December 31, 2007 and 2006
 (In thousands of U.S. dollars)
 UnauditedNote
    
    
    2007
    
    
    2006Cash flows from operating activities:Net income
    
    
    
    
    
    
    260,245
    
    
    
    156,550Adjustments to reconcile net income to net cash provided
by operating activities-Depreciation and amortization
    
    
    9
    
    
    
    58,337
    
    
    
    50,548Cost of asset retirement obligations
    
    
    13-14
    
    
    
    (209
    )
    
    
    858Deferred tax assets
    
    
    
    
    
    
    (57,184
    )
    
    
    (45,236
    )Net changes in operating assets-Accounts receivable from stockholders and related companies
    
    
    
    
    
    
    (453,657
    )
    
    
    (425,528
    )Prepaid expenses and other
    
    
    
    
    
    
    (2,358
    )
    
    
    Inventories of materials and supplies
    
    
    
    
    
    
    333
    
    
    
    909Recoverable value added tax
    
    
    
    
    
    
    (20,373
    )
    
    
    (7,545
    )Net changes in operating liabilities-Non-current account payable to PDVSA Petróleo, S.A.
    
    
    
    
    
    
    (12,624
    )
    
    
    15,557Accounts payable
    
    
    
    
    
    
    412,775
    
    
    
    120,127Income tax payable
    
    
    
    
    
    
    (132,371
    )
    
    
    140,538Accrued and other liabilities
    
    
    
    
    
    
    84,292
    
    
    
    27,911Total adjustments
    
    
    
    
    
    
    (123,039
    )
    
    
    (121,861
    )Net cash provided by operating activities
    
    
    
    
    
    
    137,206
    
    
    
    34,689Cash flows used in investing activities  acquisition of property, plant and equipment
    
    
    9
    
    
    
    (30,631
    )
    
    
    (34,689
    )Cash flows from financing activities-Capital stock paid
    
    
    
    
    
    
    
    
    
    
    465Contribution of shareholders
    
    
    
    
    
    
    3,510
    
    
    
    6,242Dividends paid
    
    
    11-d
    
    
    
    (47,406
    )
    
    
    Cash flows used in financing activities
    
    
    
    
    
    
    (43,896
    )
    
    
    6,707Net increase in cash
    
    
    
    
    
    
    62,679
    
    
    
    6,707Cash at beginning of year
    
    
    
    
    
    
    6,707
    
    
    
    Cash and cash equivalents at end of year
    
    
    
    
    
    
    69,386
    
    
    
    6,707Supplemental disclosure:Cash paid during the year for-Income tax
    
    
    
    
    
    
    153,575
    
    
    
    Transaction not requiring cash:Initial stockholders contribution through delivery of net assets
    
    
    11-b
    
    
    
    
    
    
    
    471,901
   F-151




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##### Table of Contents



PETRORITUPANO, S. A.
 (Subsidiary
60% owned by Corporación Venezolana del Petróleo, S.A.  CVP)
 Notes to Financial Statements
 December 31, 2007 and 2006
 (Unaudited with respect to the year ended December 31, 2006)
 (In thousands of U.S. dollars)
 (1)
    
    Reporting EntityPetroritupano, S. A. (the Company) was incorporated as a result of the migration process from
the operating agreement to mixed company after all the relevant approvals by the Venezuelan
government, and it began operations since April 1°, 2006 in the area denominated Oritupano -
Leona, located in Anzoátegui and Monagas States.During the year 2005, the Ministry of Peoples Power for Energy and Petroleum (MENPET)
instructed the Boards of Directors of Petróleos de Venezuela, S.A. (PDVSA), and its subsidiary
Corporación Venezolana del Petróleo, S.A. (CVP), for the conversion of the operating
agreements of PDVSA Petróleo, S. A. (PDVSA Petróleo), a subsidiary of PDVSA, to mixed
companies. On August 5, 2005, the following participants of the operating agreements of the
Oritupano  Leona area: Petrobrás Energía, S.A.; APC Venezuela, S.R.L.; Venezuela US S.R.L.
and Corod Producción, S.A. signed a transitory agreement with PDVSA Petróleo and CVP for the
conversion of a mixed company which purpose is to carry out primary exploration activities in
search for hydrocarbon wells, their initial extraction from natural wells, collection,
transportation and storage, pursuant to Article 9 of the Organic Hydrocarbons Law.The National Government filed on March 16, 2006 with the National Assembly through MENPET the
model project contract for the incorporation of mixed companies between CVP and private
investing companies taking part in operating agreements entered into with PDVSA Petróleo. In
May 2006, the National Assembly agreed the incorporation, creation and operations of the
Company in order to develop the abovementioned primary activities for a twenty-year period.On March 31, 2006, Petrobrás Energía, S.A.; APC Venezuela, S.R.L.; Venezuela US S.R.L. and
Corod Producción, S.A. signed jointly with PDVSA Petróleo and CVP a memorandum of
understanding whereby, subject to all necessary approvals including the approval of the
National Assembly of the Bolivarian Republic of Venezuela and the corporate approvals of the
participating companies, they will have 40% and 60%, respectively, of participation on the
Companys capital stock. The mixed company will be in charge of conducting the primary
activities provided in the model project contract for the incorporation of mixed companies,
and their by-laws and incorporation document will be adjusted as per such model. In addition,
pending to the approvals established in the memorandum of understanding, the parties agreed
having reached an agreement regarding the basis of economic calculations for the commencement
of operations of the mixed company, including the signing of the purchase/sale contract of
hydrocarbons with PDVSA Petróleo, on April 1°, 2006.The contract model for the creation of mixed companies establishes the automatic
extinguishment of operating agreements since March 31, 2006, whereby the operating companies
are not entitled to receive any compensation as a result of these agreements, except for any
payments pending related to the first quarter of 2006 or to file any claim as a result of such
extinguishment. In addition, it rules the transfer of ownership of assets operated at such
date under these agreements, and that these be made immediately available to the mixed
companies, for the development of their activities.In accordance with the terms and conditions for the creation of mixed companies, approved by
the National Assembly, such companies would operate within a transition period, between April
1°, 2006 and the date when these are formally incorporated. Once incorporated, the
contractual terms would apply retroactively since April 1°, 2006.
  F-152




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##### Table of Contents




    
    Extraction tax: establishes a rate of one third of the value of liquid hydrocarbons
extracted from any reservoir, calculated over the same basis established in the Law for
the calculation of the production tax. In calculating this tax, the taxpayer shall
deduce the amount that had been paid for production tax, including any additional
production tax paid.
 
    
    Export registration tax: it establishes a rate of one over one thousand over the value
of all hydrocarbons exported from any port of the Venezuelan territory, calculated over
the sales price of such hydrocarbons.
 (2)
    
    Basis of Presentation
 (a)
    
    Statement of ComplianceThe financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRSs), issued by the International Accounting Standards Boards
(IASB) and its interpretations issued by the International Financial Reporting
Interpretations Committee (IFRIC) of the IASB.On February 14, 2008, the Board of Directors approved submitting to the consideration of
the Stockholders Meeting the financial statements of the year 2007, which will be
presented soon during such Stockholders Meeting and they are expected to be approved
without any modification. The financial statements of the nine-month period ended
December 31, 2006, were approved on June 21, 2007 by the Board of Directors.(b)
    
    Basis of MeasurementThe financial statements have been prepared on the historical cost basis, except for
certain assets that have been adjusted to be presented at their fair value. Assets and
liabilities measured and presented at their fair value are inventories and property,
plant and equipment contributed by the stockholders at the beginning of the operations,
and asset retirement obligations (see notes 11 and 14).(c)
    
    Functional and Presentation CurrencyThe financial statements are presented in U.S. dollars (dollar or $). The Companys
functional currency is the dollar, due to the fact that the main economic operational
environment of the Company is the international market for upgraded crude oil and its
products. In addition, a significant portion of costs, expenses and investments are
denominated in dollars.(d)
    
    Use of Estimates and JudgmentsFor the financial statements preparation pursuant to IFRSs, management is required to
make estimates, judgments and assumptions that affect the application of accounting
policies and the reported amounts of assets, liabilities, income and expenses. The
Company applies its best estimates and judgments; however, actual results may vary from
those estimates.Estimates and related assumptions are based on the experience and some other factors that
are deemed reasonable in the current circumstances, which result is the basis to form
judgments on the carrying value of assets and liabilities that are not easily
determinable by other sources. Estimates and assumptions are reviewed periodically, and
the reviews of these accounting estimates are recognized in the same period and the
future periods affected.
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Significant areas of uncertainty and critical judgments in the application of accounting
principles that have the most significant effect on the amounts recognized in the
financial statements follow:
 Notes 3(c) and 9
    
    - Depreciation and amortizationNotes 3(d) and 14
    
    - Accrual for asset retirement obligationsNote 6
    
    - Determination of fair valueNote 3(g)
    
    - Impairment of assetsNote 8(a)
    
    - Deferred income tax
 (e)
    
    Balance Sheet PresentationIn the preparation and presentation of its financial statements until December 31, 2006,
the Company had used a format for the balance sheet, where the assets and liabilities
were presented from current to non-current items in accordance with the expectation of
asset realization and liability payment. During the year 2007, the Company opted for
presenting its balance sheet using a criterion different from the previous period,
presenting its assets and liabilities from non-current to current items. The Company
considers that this presentation, in accordance with IFRSs, reflects more adequately the
nature of its operations and industry trends.
 (3)
    
    Significant Accounting PoliciesThe accounting policies set out bellow have been applied consistently:
 (a)
    
    Currencies Other than the DollarTransactions in currencies other than the dollar are translated at the functional
currency, using the exchange rate in effect at the transaction date. Monetary assets and
liabilities denominated in currencies other than the dollar at the balance sheet date are
translated to the functional currency, using the exchange rate in effect at such date.
Exchange incomes or losses resulting from the translation are recognized in the statement
of income (see note 5).(b)
    
    Financial InstrumentsNon-derivative Financial InstrumentsNon-derivative financial instruments are recognized initially at fair value, plus any
direct transaction costs, subsequent to initial recognition. Non-derivate financial
instruments are presented at fair value at the balance sheet date.A financial instrument is recognized when the Company is bound to or is engaged in the
contractual clauses of it. Financial assets are reversed if the Companys contractual
rights on cash flows expire or if the Company transfers the financial asset to another
entity without retaining the control or a significant portion of the risks and benefits
of the asset. Purchases and sales of financial assets made using the usual procedures
are accounted for at the negotiation date, which is generally the date when the Company
commits to purchase or sell the asset. Financial liabilities are extinguished when the
specific contractual obligation of the Company expires or is paid.Financial Assets at Fair Value Through Profit or LossAn instrument is classified at fair value through profit or loss if it is held for
trading or is designated as such upon initial recognition. Financial instruments are
designated at fair value through profit or loss if the Company manages such investments
and makes purchase and sale decisions based on their fair value in accordance with the
Company investment strategy. Upon initial recognition attributable transaction costs are
recognized in profit or loss when incurred. Financial instruments at fair value through
profit or loss are measured at fair value, and changes therein are recognized in profit
or loss. Assets in this category are classified as current assets.
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OtherOther non-derivative financial instruments are measured at amortized cost using the
effective interest method, less any impairment losses.(c)
    
    Property, Plant and EquipmentProperty, plant and equipment are stated at cost less accumulated depreciation and losses
due to impairment. The successful efforts method of accounting is used for oil and gas
exploration and production activities. The costs of exploratory wells, plant and related
equipments and the properties assigned to the exploitation of crude oil are assessed as
part of the cost of the assets. The costs of exploratory wells are accounted for as
assets until they are proved productive, otherwise, they are charged to operating
expenses. Other exploratory expenditures, including the geological and geophysical costs
are charged to operating expenses when incurred. Major maintenance costs or for a general
repair are capitalized in the cases where these are identified as a separate component of
the asset to which such maintenance or repair corresponds and are depreciated over the
period between one maintenance and another. Expenditures for minor maintenance of the
facilities, repairs and renewals carried out to maintain facilities in operating
conditions are expensed when incurred.The cost of replacing parts and improvement of an item of property, plant and equipment
is recognized in the carrying amount of the item if it is probable that the future
economic benefits embodied within the part will flow to the Company and its cost can be
measured reliably.Costs of property, plant and equipment also include, when relevant, the amounts
associated with asset retirement obligations (see note 3 (d)).Financing costs of projects that require high investments over long-term construction
periods and the financing cots incurred for specific financing of projects are
capitalized and amortized over the estimated useful lives of the assets.The cost of assets built by the Company includes the financing cost, materials and direct
labor as well as any other costs directly attributable to bringing the asset to a working
condition. It also includes dismantling and removal costs at the location where built.All disbursements related to the construction or purchase of property, plant and
equipment in the stage prior to implementation are stated at cost as work in progress.
Once the assets are ready for use, they are transferred to property, plant and equipment
and start to be depreciated or amortized.When parts of an item of property, plant and equipment have different useful lives, they
are accounted for as separate items (major components) of property, plant and equipment.Gain or loss generated from the sale or disposal of an asset of property, plant and
equipment is determined by the difference between the amount received from the sale or
disposal, if any, and the net carrying value of the asset, and it is recognized as part
of other income, net in the statement of income.Depreciation and depletion of capitalized costs of the wells and facilities of crude oil
production equipment are determined using the units-of-production method by field, based
on the proved developed reserves. The rates used are reviewed annually based on an
analysis of the reserves and are applied retroactively at the beginning of the year.The calculation of the depreciation of property, plant and equipment associated to the
crude oil production, requires the quantification of proved developed reserves expected
to be extracted in the future by the Company. The analysis of reserves is updated
periodically in order to guarantee that any change in the estimates made be timely
recognized in the Companys financial statements.
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Depreciation of property and equipment not related to exploration and exploitation of
hydrocarbons is calculated based on the straight-line method using the estimated useful
lives of fixed assets:
 YearsOperating equipment
    

    17 - 4Computer equipment and vehicles
    

    4
 The useful lives of these property and equipment are reviewed annually.(d)
    
    Cost Related to Asset Retirement ObligationsPetroritupano, S. A. capitalizes the estimated costs related to asset retirement
obligations for exploration and production of oil and other industrial facilities, based
on the future disposal plan of such assets. Cost is capitalized as part of the related
long-lived asset and amortized with charge to the operating costs during their remaining
useful lives.Asset retirement obligations are recognized at fair value at the date when such
obligation is incurred, based on discounted future cash flows. The determination of fair
value is based on the existing regulations and technologies.(e)
    
    Inventories of Materials and SuppliesInventories of materials and supplies are presented at the lower of cost or net
realizable value. The cost of inventories is based on the average method. The carrying
amount of inventories does not exceed their recoverable value. During 2007 and 2006, the
materials and supplies recognized as operating expenses amounted to $10,131 and $6,646,
respectively.(f)
    
    Cash EquivalentsPetroritupano, S. A. considers as cash equivalents all time deposits with original
maturities of less than three months and available on a current basis, which at December
31, 2007, was approximately $69 million.(g)
    
    Impairment of AssetsFinancial AssetsFinancial assets are assessed by the Company at the financial statement date, in order to
determine whether there is objective evidence of impairment. A financial asset is
impaired if there is objective evidence that one or more events have had a negative
effect on the assets estimated future cash flows.Significant financial assets are assessed individually in order to determine their
impairment. The remaining financial assets with similar credit risks characteristics are
assessed by groups.Losses from impairments are recognized in the statements of income. The reversal of a
loss from impairment occurs only when this can be objectively related to an event
occurred after the date when the loss for impairment was recognized.Non-Financial AssetsThe carrying amunts of non-financial assets, excluding inventory and deferred tax, are
reviewed at each reporting date to determine whether evidence of impairment exists. If
any such indication exists then the recoverable amount of the asset is estimated.An impairment loss is recorded when the carrying amount of an asset or of its
cash-generating unit exceeds the recoverable amount. A cash generating unit is the
smallest group of assets identifiable generating cash flows substantially independent of
other assets or groups of assets. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of the related assets to estimated
undiscounted future net cash flows expected to be generated by the asset. If the
carrying amount of an asset exceeds its estimated future cash flows, an impairment charge
is recorded for the amount by which the carrying amount of the asset exceeds the fair
value of the asset. The cost of the relevant asset is presented net of this impairment
charge.
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Impairment is determined by the Company based on the cash generating units, in accordance
with its business segments, geographical locations and the final use of the production
generated by each unit. An impairment loss is reversed if there has been a change in the
estimate used to determine the recoverable amount.The management assesses annually the impairment in the value of property, plant and
equipment. The main key assumptions used by the management in order to determine the
recoverable amount of property, plant and equipment are the projections of income, oil
prices, royalties, operating and capital costs and the discount rate. Likewise, the
projections include the proved developed reserves that will be exploited during the
estimated period of production of the field.(h)
    
    Employee Benefits and Other Postretirement ObligationsFollowing corporate instructions from PDVSA, the Companys related entity PDVSA Petróleo
assumed the employer condition of the workers that accepted their transfer and who work
as assignees in the operations of Petroritupano, S. A. PDVSA Petróleo administrates and
calculates the payroll of such workers and bills the Company for the costs corresponding
to the direct and indirect labor; the latter recognizes such labor costs against a
liability in favor of PDVSA Petróleo. The costs corresponding to the indirect labor are
determined by PDVSA Petróleo according to the following accounting policies:Severance IndemnitiesSeverance indemnities for labor terminations in Venezuela are recorded in accordance with
Venezuelan Labor Law and the effective union contracts. Severance indemnities are
deposited monthly in trust accounts on behalf of each employee.On October 11, 2007, PDVSA signed a labor collective contract effective until year 2009,
whereby salary improvements and social benefits are introduced for workers of the
contractual payroll in Venezuela. The obligations resulting from the application of this
collective contract are in effect since November 2007.Short-term BenefitsObligations due to short-term benefits, as employees bonuses, vacations and other
benefits are accounted for as expenses as the related service is provided by the worker.Pension PlanPDVSAs net obligation for retirement benefits and other postretirement obligations as
defined by contract is calculated for each participant in the plan, estimating the amount
of future benefits that employees have acquired for their services during the current and
prior periods; these benefits are discounted in order to determine their present value
which is reduced by the fair market value of plan assets. The discount rate must reflect
the yield which, at the date of the financial statements, is reflected by financial
instruments issued by institutions with high credit ratings and having maturities similar
to those of the obligations. The calculation is made by an actuary using the projected
unit credit method.Improvements to benefits of a plan, relating to the cost of past services, are recorded
as an expense in the statement of income over the estimated period, until the benefits
become vested. To the extent such benefits are vested, the expense is recorded
immediately in the statement of income.The Company records as either income or expense a portion corresponding to the amount of
its unrecorded actuarial gains or losses, exceeding 10% of the greater of the following
amounts:
 
    
    The present value of defined benefit obligations; and
    
    The fair value of the plans assets.
 The resulting amount is divided between the average remaining service period of the
employees participating in the plan. These limits are determined and applied separately
for each of the defined benefit plans.
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Other Postretirement BenefitsThe net obligation for other postretirement benefits, other than the pension plan,
contractually defined, is the amount of future benefits that employees have earned for
their services during the current and prior periods. These benefits include mainly
health and dental plan, funeral insurance and electronic meal card. The obligation is
calculated using the projected unit credit method, and is discounted to reflect its
present value and is reduced by the fair value of related assets, if any. The discount
rate must reflect the performance of financial instruments issued by institutions of high
credit rating at the date of the financial statements and having maturities similar to
those of the obligations.Cost of past services and actuarial gains or losses are recorded using the same
methodology as used for the contractually defined benefit plan.(i)
    
    ProvisionsA provision is recognized if, as a result of a past event, the Company has incurred a
legal or formal obligation that it may estimate reliably, and it is probable that the
disbursement of economic benefits be required to fulfill the obligation.According to the environmental policy established by Petroritupano, S. A. and the legal
applicable standards, a liability is recognized when costs are probable and may be
reasonably estimated. The disbursements relating to the preservation of the environment,
linked to income for current or future operations are accounted for as expenses or
assets, as required. Disbursements relating to past operations that do not contribute to
the obtaining of current or future income are charged to expenses.The creation of these provisions coincides with the identification of an obligation
relating to environmental remediation, for which Petroritupano, S. A. has the adequate
information to determine a reasonable estimate of the cost. Subsequent adjustments to
estimates, if necessary, are recorded upon obtaining additional information.(j)
    
    Income RecognitionRevenues from the sale of hydrocaburals are recorded in the statement of income when the
significant risk and rights of ownerships have been transferred to PDVSA Petróleo and
MENPET, according to the purchase agreement  sale of hydrocarbons signed between the
Company and PDVSA Petróleo, and may be reasonably measured and it is probable that future
economic benefits flow towards the Company. This income is calculated and accounted for
at the transaction date, based on the specifications of such contract.In the case of income from activities other than the Companys main business, it is
recognized when income has been realized. Income is not recognized if there is
significant uncertainty as to the recovery of the obligation acquired by the buyer.(k)
    
    Income TaxIncome tax expense comprises the current and deferred tax. Income tax expense is
recognized in the results of each year, except when it refers to items that must be
recognized directly in equity.Current tax is the expected tax payable, calculated over the taxable income of the year,
using the methodology established by the current legislation, effective tax rates a the
balance sheet date and any adjustment to the tax payable from previous years.Deferred income tax is accounted for using the balance sheet method. Deferred tax assets
and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amount of existing assets and
liabilities and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled, pursuant to the law. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
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A deferred tax asset is recognized only up to the amount that it is probable that future
taxable income is available on which to offset it. Deferred tax assets are reviewed at
the financial statement presentation date and are reversed as the probability of
realizing the related tax benefit is reduced.Income tax arising from the distribution of dividends, determined on the basis of the tax
law, is recorded as a liability when the liability to pay the related dividend is
recognized.(l)
    
    Capital StockOrdinary shares are classified as equity. As of December 31, 2007 and 2006, the Company
does not have preferred share (see note 11 (a)).(m)
    
    Premium in Issue of SharesThe Company records as premium in issue of shares any excess of the contributions
generated by the stockholder during the Companys incorporation and the nominal value of
 shares at the incorporation date (see note 11 (b)).(n)
    
    Distribution of DividendsDividend distributions to the Companys shareholders are recognized as a liability in the
financial statements in the period in which the dividends are approved by the Companys
shareholders (see note 11 (d)).(o)
    
    Recently Issued Accounting StandardsSeveral new standards and amendments and interpretations to the current standards are not
still in effect for the year ended December 31, 2007, and have not been applied in the
financial statements preparation. The most significant ones for the Company follow:
 
    
    In March 2007, the IASB issued the International Accounting Standard No 23
revised Borrowing Costs(IAS 23), which eliminates the option to recognize financing
costs in the statement of income and requires the companies to capitalize these
directly attributable costs to the acquisition, construction or production of a
qualified asset as a cost of this asset. This standard will be in effect for the
economic period beginning on or after January 1°, 2009.
    
    In September 2007, IASB issued the International Accounting Standard No 1 revised
(IAS 1) Presentation of Financial Statements, which introduces an unrealized
statement of income due to operations with the stockholder, in order to improve the
analysis capability and comparison of the information provided in the financial
statements. This standard will be in effect for the economic periods beginning on
or after January 1°, 2009.
 The Company is assessing the new standards issued, and based on their analysis at this
date, it believes that these will not have a significant impact on its financial
statements.(p)
    
    Recently Adopted Accounting StandardsDuring the year 2007, the following standards and interpretations came into effect:
 
    
    IFRS 7 Financial Instruments: Disclosuresand the amendment to IAS 1 Presentation
of Financial Statements: Capital Disclosures, requires detailed disclosures on the
relevance of the financial instruments for the financial situation of an entity and
its performance, both qualitative and quantitative on the nature and scope of
associated risks.
    
    Interpretation No 9 (IFRIC 9) Reassessment of Embedded Derivatives, requires an
entity to assess an implicit derivative financial instrument separating it from the
host contract and accounting it for as a derivative since the date of the contracts
signing by the entity. The subsequent revaluation is prohibited, unless a change in the contracts original terms.
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
    
    Interpretation No 10 (IFRIC 10) Interim Financial Information Reporting and
Impairment,clarifies that an entity must not reverse the losses for impairment
recognized in a previous interim period regarding the goodwill or the investment of
any financial asset recorded at cost.
  (4)
    
    Foreign Exchange Agreement with the Central Bank of Venezuela (BCV)According to the Amendment to the BCV Law, effective from July 20, 2005, PDVSA and
subsidiaries must sell to the BCV only foreign currency revenues necessary to meet its local
currency obligations. The remaining foreign currency amounts can be held by PDVSA and
subsidiaries in order to meet its foreign currency obligations and investments.On November 21, 2005, the National Government and the BCV subscribed Exchange Agreement No 9,
which establishes the destination of funds derived from the exportation of hydrocarbons and
other, which must be sold to the BCV, except for those resulting from PDVSA and subsidiaries
activities as mentioned in the New BCV Law above. Such agreement states that PDVSA and its
subsidiaries are not allowed to maintain funds in foreign currency within the National
Territory for more than 48 hours and establishes conditions for the use of funds by PDVSA and
subsidiaries, the monthly information to be filed with the BCV relating to the flow of funds
generated by its activities, its asset and liability positions in foreign currency and
detailed information of the payments made by PDVSA and subsidiaries abroad.According to the above amendment law, effective until July 19, 2005, the foreign currency
revenues generated by PDVSA, including its Venezuelan subsidiaries must be sold to the BCV at
the agreed exchange rate and the BCV must supply at the agreed exchange rate and effective as
of the date of the transaction, the foreign currency amounts that PDVSA and subsidiaries
requests to satisfy its needs, according to the annual foreign exchange budget. The exchange
agreement established that PDVSA could pay with such currency amounts its debts, investments
and operating expenses, and keep a rotatory fund up to $600 million, available for working
capital.On March 1°, 2005, the National Government and the BCV substituted exchange agreement No 2
dated February 6, 2004, setting the exchange rates for the sale and purchase of foreign
currencies at Bs2,150.00 and Bs2,144.60 per $1, respectively.(5)
    
    Balances in Currencies other than the DollarAs of December 31, 2007 and 2006 Petroritupano, S. A. has the following monetary assets and
liabilities denominated in bolivars, which are translated to dollars at the exchange rate
prevailing at the balance sheet date:
 2007
    
    
    2006Dollars
    
    
    Bolivars
    
    
    Dollars
    
    
    BolivarsMonetary assets
    
    
    336,679
    
    
    
    723,860,335
    
    
    
    4,367
    
    
    
    9,389,050Monetary liabilities
    
    
    649,392
    
    
    
    1,396,193,483
    
    
    
    173,209
    
    
    
    372,399,350Net monetary liability position
    
    
    (312,713
    )
    
    
    (672,333,148
    )
    
    
    (168,842
    )
    
    
    (363,010,300
    )
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2007
    
    
    2006Exchange rate at year-end (Bs/$1)
    
    
    2,150
    
    
    
    2,150Average annual exchange rate (Bs/$1)
    
    
    2,150
    
    
    
    2,150Interannual increase in the exchange rate (%)
    
    
    
    
    
    
    Interannual increase in the CPI (%)
    
    
    22
    
    
    
    17
 (6)
    
    Determination of Fair ValueSome of the Companys accounting policies and disclosures require the determination of fair
value for assets and liabilities, both financial and non-financial. Fair values have been
estimated for valuation purposes and/or disclosure, using the information available in the
market, and following appropriate valuation methods. Additional information on the fair value
estimation of assets and liabilities is disclosed in the specific notes to the financial
statements.The fair value of property, plant and equipment recognized as a result of a business
acquisition is based fundamentally on the market value and other appropriate valuation
methods. The market value of the asset corresponds to the estimated amount at which this
could be exchanged at the valuation date between a willing buyer and a seller in a transaction
in conditions of mutual independence, subsequent to an adequate trading where both parties
have acted with knowledge, prudence and without obligation.The fair value of recoverable value added tax is determined discounting the carrying value, as
per recoveries and estimated future collections, using interest rates applicable in the
monetary market.Balances in books of cash and cash equivalents, accounts receivable from stockholders and
related companies, and accounts payable approximate their fair value due to the short maturity
of these instruments. The fair value of non-current account payable to PDVSA Petróleo, S.A.
at December 31, 2007, is determinate considering the interest rates, and contemplates any
credit risk.The fair value of derivative instruments is based on the estimated amount that the Company
would receive or pay to terminate the agreements, taking into account current commodity prices
and interest rates and the current creditworthiness of the counterparties.(7)
    
    Financial Risk ManagementPetroritupano, S. A. is exposed to the following risks relating to the use of financial
instruments:
 
    
    Credit risk.
    
    Liquidity risk.
    
    Market risk.
 This note presents information regarding the exposure of Petroritupano, S. A. to each risk
mentioned, the Companys objectives, the policies and procedures to measure and managing the
risk and the management of capital. Further quantitative disclosures are included in these
financial statements.Petroritupanos Board of Directors is responsible for establishing and supervising the
Companys risk management framework. The effect of the business risk is estimated in the
strategic and budgetary planning processes, in order to have an integral view of its impact on
the Company.Risk management policies are established in order to identify and analyze the risks faced by
the Company, fix adequate limits and risk controls, and monitor risks and the compliance with
the limits. The policies and risk management systems are reviewed regularly in order for them
to reflect the changes in the market conditions and the Companys activities.
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(a)
    
    Credit Risk
 It is the risk of financial loss faced by the Company if a client or counterparty in a
financial instrument does not comply with its contractual obligations, and it is mainly
caused by cash and cash equivalents and accounts receivable from customers. In order to
mitigate the credit risk, cash equivalents are represented by high-quality instruments
placed in diverse institutions. Likewise, there is a risk concentration of trade
accounts receivable, due to the fact that 100% of the sales of crude oil production are
delivered to the related company PDVSA Petróleo (see note 16).
 (b)
    
    Liquidity Risk
 It is the Companys risk as to failing to fulfill its financial obligations as these
become due. The approach of Petroritupano, S. A. to manage the liquidity is to assure,
to the greatest extent possible, that it will always count on the sufficient liquidity to
comply with its obligations as these mature, both under normal conditions as under
stressed conditions, without incurring unacceptable losses or risking the Companys
reputation.The Company ensures having enough cash at sight in order to solve the expected operating
expenses during a ninety-day period, including the payment of financial obligations; this
excludes the possible impact of extreme circumstances that cannot be predicted
reasonably, such as natural disasters.
 (c)
    
    Market Risk
 It is the risk of changes in market prices, among them the exchange rates, interest rates
or sales prices affecting the income of Petroritupano, S. A. or the value of the
financial instruments it maintains.The Companys activities, the financial conditions and the operating results are
proportional to the volumes of upgraded crude oil prices. These prices are cyclic and
tend to be unstable, and therefore the primary risk of this business is the volatility of
the upgraded crude oil prices.PDVSA Petróleo, which is the main client of the Company, monitors constantly the markets
conditions in order to assure the placement of its crude oil production and its products
the best way possible. In addition, the Bolivarian Republic of Venezuela is a member of
the Organization of the Petroleum Exporting Countries (OPEC), through which agreements
are signed to pursue stable prices for crude oil and its products.
 (8)
    
    TaxesA summary of the taxes affecting the operations of Petroritupano, S. A. for the year ended
December 31, 2007 and for the nine-month period ended December, 31 2006 follows:
 2007
    
    
    2006Income tax
    
    
    104,558
    
    
    
    95,302Production and other taxes
    
    
    281,990
    
    
    
    205,864386,548
    
    
    
    301,166
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(a)
    
    Income TaxThe estimated income tax expense for the year ended December 31, 2007 and for the
nine-month period ended December, 31 2006, is composed as follows:
 2007
    
    
    2006Estimated income tax expense
based on the periods taxable income
    
    
    161,742
    
    
    
    138,862Tax on initial inflation  adjusted assets
    
    
    
    
    
    
    1,676Deferred tax benefit
    
    
    (57,184
    )
    
    
    (45,236
    )104,558
    
    
    
    95,302
 The Companys tax period ends on December 31, each year.During the year 2007, the Company determined tax income of $323,484, which caused an
income tax expense of $161,742, presented as part of the income tax payable net to tax
paid in advance of $153,575. During the nine-month period ended December 31, 2006 the
Company determined tax income of $277,724, which caused an income tax expense of
$138,862, presented as part of income tax payable.The Income Tax Law establishes that taxpayers shall made an initial inflation adjustment
at closing of the first taxable period of non-monetary assets and liabilities pursuant to
the Standards established in such Law. Likewise, taxpayers shall register before the
Registry of Revaluated Assets during such period when they complete initial inflation
adjustment. Such registration causes the obligation to pay a rate equivalent to 3% of
the amount of the initial inflation adjustment caused by the depreciable fixed assets,
payable up to three equal, annual and consecutive portions. This tax was applicable to
Petroritupano, S. A. during the nine-month period ended December 31, 2006, which amounted
to $1,676 and is presented as part of the income tax payable at December 31, 2006. The
Law also establishes a regular inflation adjustment which will be included in the income
reconciliation as a taxable or non-deductible item.The Partial Reform of the Income Tax Law published in Official Gazette N° 38,529 dated
September 25, 2006, derogated investment tax credits applicable to companies engaged in
the exploitation of hydrocarbons and related activities.The main differences between the amount of the income tax calculated based on the tax
rate of 50% and the effective tax rate for the year ended December 31, 2007 and for the
nine-month period ended December, 31 2006 is presented as follows (in thousands, except
the percentage):
 2007
    
    
    2006%
    
    
    Dollars
    
    
    %
    
    
    DollarsIncome before income tax
    
    
    100
    
    
    
    364,803
    
    
    
    100
    
    
    
    251,852Income tax calculated based on the tax rate
    
    
    50
    
    
    
    182,402
    
    
    
    50
    
    
    
    125,926Property, plant and equipment
    
    
    (21
    )
    
    
    (78,072
    )
    
    
    (14
    )
    
    
    (33,699
    )Regular inflation adjustment
    
    
    (8
    )
    
    
    (30,012
    )
    
    
    
    
    
    
    Initial inflation adjustment on assets
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1,676Other
    
    
    8
    
    
    
    30,240
    
    
    
    1
    
    
    
    1,39929
    
    
    
    104,558
    
    
    
    38
    
    
    
    95,302
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##### Table of Contents



The deferred tax assets components as of December 31, 2007 and 2006 follow:
 2007
    
    
    2006Property, plant and equipment, net
    
    
    78,072
    
    
    
    33,699Asset retirement obligations, net
    
    
    2,495
    
    
    
    3,758Contributions payable
    
    
    118
    
    
    
    Contribution for the Law on Science,
Technology and Innovation
    
    
    6,084
    
    
    
    Contribution for the Law on the Prevention
of the Illicit Use of Stupefacient and
Psychotropic Substances
    
    
    911
    
    
    
    Accrued lialibities
    
    
    14,740
    
    
    
    7,779102,420
    
    
    
    45,236
 The components of the deferred tax benefit for the year ended December 31, 2007 and for
the nine-month period ended December, 31 2006 are as follows:
 2007
    
    
    2006Property, plant and equipment, net
    
    
    (44,373
    )
    
    
    (33,699
    )Assets retirement obligation, net
    
    
    1,262
    
    
    
    (3,758
    )Contributions payable
    
    
    (118
    )
    
    
    Contribution of the Law on Science,
Technology and Innovation
    
    
    (6,084
    )
    
    
    Contribution of the Law on Prevention
of the Illicit Use of Stupefacient and
Psychotropic Substances
    
    
    (911
    )
    
    
    Accrued liabilities
    
    
    (6,960
    )
    
    
    (7,779
    )(57,184
    )
    
    
    (45,236
    )
 (b)
    
    Production and Other TaxesProduction TaxPursuant to Article 44 of the Organic Hydrocarbons Law, from any hydrocarbon volume
extracted from any reservoir by mixed companies, the State has the right to a
participation of 30% as production tax. During the year ended December 31, 2007 and for
the nine-month period ended December 31, 2006 Petroritupano, S. A. paid production tax
for crude oil of $238,828 and $182,898, respectively, through delivery of crude volumes
to PDVSA Petróleo on account of the MENPET.Additional Production TaxesThe Company is subject to the payment of some additional taxes, which are determinable
based on: a) a participation as additional production tax of 3,33% over the volume of
hydrocarbons extracted in the specified area, which will be distributed as follows: 2,22%
directly to the municipalities composing the specified area, superseding the payments not
received by such municipalities for the concept of municipal taxes and 1,11% for a fund
to finance endogenous development projects pursuant the guidelines of the National
Development Plan in the Relevant Region and; b) an amount equivalent to the difference,
if any, between (i) 50% of the value of hydrocarbons extracted from the specified area
during each calendar year and (ii) the sum of the payments made by Petroritupano S. A. to
the Bolivarian Republic of Venezuela, regarding the activity developed by the latter
during such calendar year, for the production tax applicable on the hydrocarbons,
including the ones mentioned above, and the investments in endogenous development
projects corresponding
to 1% of income before income tax. The additional tax shall be paid on April 20 each
year, pursuant to the dispositions established in Annex F of the contract of conversion
to mixed company.
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A summary of the production and other taxes for the year ended December 31, 2007 and for
the nine-month period ended December, 31 2006 follows:
 2007
    
    
    2006Crude oil production tax
    
    
    238,828
    
    
    
    182,898Production tax to municipalites
    
    
    17,674
    
    
    
    13,535Production tax for endogenous development projects
    
    
    8,836
    
    
    
    6,767Accrual for investment in endogenous projects
    
    
    2,664
    
    
    
    2,664Contribution for the application of the
Law on Science, Technology and Innovation
    
    
    12,169
    
    
    
    Contribution of the Law on Prevention of the
Illicit Use of Stupefacient and
Psychotropic Substances
    
    
    1,819
    
    
    
    281,990
    
    
    
    205,864
 (c)
    
    Value Added TaxOfficial Gazette N° 38,632 of February 27, 2007 published the decrease of the Value Added
Tax (VAT) rate from 14% to 11% with effectiveness since March 1°, 2007 until June 30,
2007 and to nine 9% since July 1°, 2007.The Company is not subject to VAT withholdings, due to the fact that the natural
hydrocarbon sales made by the mixed companies ruled by the Organic Hydrocarbons Law to
PDVSA or to any of its subsidiaries are not subject to any tax rate, pursuant to the Law
on the effective value added tax law.Likewise, the Law establishes that mixed companies ruled by the Organic Hydrocarbons Law
will be assimilated to the regular exporting taxpayers, in order to apply the tax credits
recovery regime provided in current Law for the sales of hydrocarbons in the country to
PDVSA or to any of its subsidiaries. At December 31, 2007, the Company had not requested
the Venezuelan tax authorities the recovery of tax credits for VAT, amounting to $27,918
and present it in balance sheet as non-current assets, due to the fact that the tax
authorities were still defining the procedures for the tax credit recovery to be followed
by the mixed companies.
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(9)
    
    Property, Plant and EquipmentProperty, plant and equipment as of December 31, 2007 and 2006 include the following:
 2007
    
    
    2006Assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Costcontributed
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    associated withAt
    
    
    by the
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    asset retirementCost
    
    beginning
    
    
    stockholders
    
    
    Acquisitions
    
    
    Capitalizations
    
    
    Transfers
    
    
    obligations
    
    
    At end
    
    
    TotalProduction equipment
    
    
    246,283
    
    
    
    
    
    
    
    
    
    
    
    53,605
    
    
    
    
    
    
    
    3,149
    
    
    
    303,037
    
    
    
    246,283Operating equipment
    
    
    190,074
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (327
    )
    
    
    
    
    
    
    189,747
    
    
    
    190,074Computer equipment
and vehicles
    
    
    682
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    327
    
    
    
    
    
    
    
    1,009
    
    
    
    682Works in process
    
    
    77,689
    
    
    
    
    
    
    
    30,631
    
    
    
    (53,605
    )
    
    
    
    
    
    
    
    
    
    
    54,715
    
    
    
    77,689Total as of December 31, 2007
    
    
    514,728
    
    
    
    
    
    
    
    30,631
    
    
    
    
    
    
    
    
    
    
    
    3,149
    
    
    
    548,508
    
    
    
    Total as of December 31, 2006
    
    
    
    
    
    
    470,249
    
    
    
    34,689
    
    
    
    
    
    
    
    
    
    
    
    9,790
    
    
    
    
    
    
    
    514,728
 2007
    
    
    2006DepreciationDepreciation
    
    
    
    
    
    
    associated withAccumulated Depreciation
    
    
    
    
    
    and amortization
    
    
    
    
    
    
    asset retirement
    
    
    
    
    
    
    Net book
    
    
    Net bookand Amortization
    
    At beginning
    
    
    expenses
    
    
    Transfers
    
    
    obligations
    
    
    At end
    
    
    value
    
    
    valueProduction equipment
    
    
    29,464
    
    
    
    34,628
    
    
    
    
    
    
    
    (2,318
    )
    
    
    61,774
    
    
    
    241,263
    
    
    
    216,819Operating equipment
    
    
    21,018
    
    
    
    25,851
    
    
    
    (66
    )
    
    
    
    
    
    
    46,803
    
    
    
    142,944
    
    
    
    169,056Computer equipment
and vehicles
    
    
    66
    
    
    
    176
    
    
    
    66
    
    
    
    
    
    
    
    308
    
    
    
    701
    
    
    
    616Works in process
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54,715
    
    
    
    77,689Total as of December 31, 2007
    
    
    50,548
    
    
    
    60,655
    
    
    
    
    
    
    
    (2,318
    )
    
    
    108,885
    
    
    
    439,623
    
    
    
    Total as of December 31, 2006
    
    
    
    
    
    
    47,084
    
    
    
    
    
    
    
    3,464
    
    
    
    50,548
    
    
    
    
    
    
    
    464,180
 (10)
    
    Prepaid Expenses and OtherA summary of prepaid expenses and other as of December 31, 2007 and 2006 follows:
 2007
    
    
    2006Insurances
    
    
    1,240
    
    
    
    Recovery expenses
    
    
    1,084
    
    
    
    Advances to employee travel expenses
    
    
    34
    
    
    
    2,358
    
    
    
    
 (11)
    
    Stockholders Equity
 (a)
    
    Capital StockAt December 31, 2007 and 2006, the Companys nominal and legal capital stock is composed
as follows:
 CapitalNumber of
    
    
    
    
    
    
    Type of
    
    subscribedshares
    
    
    %
    
    
    share
    
    and paid ($)CVP
    
    
    1,317,990
    
    
    
    60
    %
    
    A
    
    
    6,130Petrobrás Energía, S. A.
    
    
    483,263
    
    
    
    22
    %
    
    B
    
    
    2,248Venezuela US S.R.L.
    
    
    395,397
    
    
    
    18
    %
    
    B
    
    
    1,8392,196,650
    
    
    
    100
    %
    
    
    
    
    10,217
 On September 4, 2006, CVP; Petrobrás Energía, S.A.; Venezuela, US S.R.L. and Corod
Producción, S.A. approved, with participations of 60%, 18%, 18% and 4%, respectively, the
association terms and incorporation of Petroritupano, S.A. with a capital stock of $465.
  F-166




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During Extraordinary Stockholders Meeting held on October 6, 2006, a decision was made
as to the transfer of shares subscribed and paid by Corod Producción, S.A. to the
stockholder Petrobrás Energía, S.A., thus modifying the share percentage of the latter
from 18% to 22%. In addition, during this meeting an increase of the Companys capital
stock was decided in $9,752 through capitalization of the contributions made by the
stockholders, pursuant to letter (a) of Article 1.4 of the contract for the conversion to
mixed company.At December 31, 2007 and 2006, common shares have a worth of $4,6511.The incorporation document of Petroritupano, S. A., establishes that the States number
of shares shall always represent at least a share percentage higher than 50% of the
Companys capital stock. Likewise, it establishes that in case of the Companys
liquidation, all assets shall be transferred to the class A stockholder, except for the
cash available not reserved for the payment of expenses and obligations, which will be
distributed to the stockholders in proportion to their participation in the Companys
capital stock.(b)
    
    Premium in Issue of SharesDuring Extraordinary Stockholders Meeting held on October 6, 2006, a decision was made
as to recognizing as a premium the additional contributions represented in property,
plant and equipment for $470,249 (stockholder A) and inventories of materials and
supplies for $1,652 (stockholders class B) in the issue of new shares, in proportion to
the participation of each partner in the Companys capital stock.(c)
    
    Legal ReserveThe legal reserve is a requirement established in the Venezuelan Code of Commerce,
according to which, Venezuelan companies should reserve 5% of their net income until the
legal reserve is equivalent to at least 10% of the capital stock in bolivars. The legal
reserve cannot be distributed as dividends.At December 31, 2006, the Company accounted for an accrual for legal reserve of
approximately $1,022, which represents 10% of the capital stock.(d)
    
    DividendsDividends are declared based on the financial statements expressed in bolivars,
considering that they represent the presentation currency of the Companys statutory
financial statements and paid to the Companys stockholders in bolivars. During an
Extraordinary Stockholders Meeting held on August 1°, 2007, it was agreed to the decree
of dividends for $118,516, of which, at December 31, 2007 $71,110 are pending payment to
CVP.
 (12)
    
    Employee Benefits and Other Postretirement ExpensesA summary of employee benefits and other postretirement expenses for the year ended December
31, 2007 and for the nine-month period ended December 31, 2006 follows expenses are include as
operating expenses and selling administrative and general expenses in the statement of income:
 2007
    
    
    2006Salaries and wages
    
    
    7,616
    
    
    
    7,122Costs of social security
    
    
    769
    
    
    
    1,439Accrual for pension
    
    
    
    
    
    
    15,557Benefits derived from the Labor Law
and collective convention
    
    
    6,751
    
    
    
    9,25515,136
    
    
    
    33,373
 Theses expenses are included as operating expenses and selling, administrative and general
expenses in the statement of income.
  F-167




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(13)
    
    Accrued and Other LiabilitiesA summary of accrued and other liabilities as of December 31, 2007 and 2006 follows:
 Non -December 31,
    
    
    Provision
    
    
    Provision
    
    
    December 31,
    
    
    Current
    
    
    current2006
    
    
    made
    
    
    used
    
    
    2007
    
    
    portion
    
    
    portionProduction tax for municipalities
    
    
    13,535
    
    
    
    17,674
    
    
    
    (5,423
    )
    
    
    25,786
    
    
    
    25,786
    
    
    
    Production tax for endogenous
development projects
    
    
    6,767
    
    
    
    8,836
    
    
    
    (4,511
    )
    
    
    11,092
    
    
    
    11,092
    
    
    
    Investments in endogenous projects
    
    
    2,664
    
    
    
    2,664
    
    
    
    
    
    
    
    5,328
    
    
    
    2,669
    
    
    
    Application of the new law on
Science, Technology and Innovation
    
    
    
    
    
    
    12,169
    
    
    
    
    
    
    
    12,169
    
    
    
    12,169
    
    
    
    Application of the Law on Prevention
of the Illicit Use of Stupefacient and
Psychotropic Substances
    
    
    1,276
    
    
    
    1,819
    
    
    
    
    
    
    
    3,095
    
    
    
    1,821
    
    
    
    Social fund withholding
    
    
    
    
    
    
    2,905
    
    
    
    
    
    
    
    2,905
    
    
    
    2,905
    
    
    
    Income tax withholdings
    
    
    
    
    
    
    2,302
    
    
    
    (1,008
    )
    
    
    1,294
    
    
    
    1,294
    
    
    
    VAT withholdings
    
    
    
    
    
    
    8,925
    
    
    
    (5,736
    )
    
    
    3,189
    
    
    
    3,189
    
    
    
    Reserve for abandonment of
unproductive wells
    
    
    3,193
    
    
    
    
    
    
    
    
    
    
    
    3,193
    
    
    
    
    
    
    
    3,193Asset retirement obligations (see note 14)
    
    
    10,648
    
    
    
    3,149
    
    
    
    (209
    )
    
    
    13,588
    
    
    
    
    
    
    
    13,588Municipal tax withholdings
    
    
    
    
    
    
    1,711
    
    
    
    
    
    
    
    1,711
    
    
    
    1,711
    
    
    
    Other investments
    
    
    
    
    
    
    31,204
    
    
    
    (24,209
    )
    
    
    6,995
    
    
    
    6,995
    
    
    
    Expenses
    
    
    
    
    
    
    104,903
    
    
    
    (79,635
    )
    
    
    25,268
    
    
    
    29,201
    
    
    
    Payroll
    
    
    
    
    
    
    613
    
    
    
    
    
    
    
    613
    
    
    
    613
    
    
    
    Other
    
    
    476
    
    
    
    9,556
    
    
    
    (467
    )
    
    
    9,565
    
    
    
    9,565
    
    
    
    Total accrual and other liabilities
    
    
    38,559
    
    
    
    208,430
    
    
    
    (121,198
    )
    
    
    125,791
    
    
    
    109,010
    
    
    
    16,781Less current portion
    
    
    24,718
    
    
    
    
    
    
    
    
    
    
    
    109,010Non  current portion
    
    
    13,841
    
    
    
    
    
    
    
    
    
    
    
    16,781
 (14)
    
    Asset Retirement ObligationsThe movement of the accrual for asset retirement obligations for the year ended December 31,
2007 and the nine  month period ended December 31, 2006 follows:
 2007
    
    
    2006Balance at beginning of period
    
    
    10,648
    
    
    
    Financial costs
    
    
    (209
    )
    
    
    9,790Provision made
    
    
    3,149
    
    
    
    858Balance at the end of period
    
    
    13,588
    
    
    
    10,648
 The business plan of Petroritupano, S. A. at December 31, 2007 establishes the conduction of
drilling and production of hydrocarbons until the year 2025; the accrual for asset retirement
obligations was calculated considering the disbursements made for this concept, associated to
current wells.
  F-168




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(15)
    
    Accounts PayableAccounts payable as of December 31, 2007 and 2006 include the following:
 2007
    
    
    2006Stockholders and related companies (see note 16)
    
    
    508,726
    
    
    
    119,402Commercial suppliers
    
    
    24,176
    
    
    
    725532,902
    
    
    
    120,127
 (16)
    
    Balances and Transactions with Related EntitiesThe Company maintains balances and carries out significant mercantile transactions with
related companies and entities, whose effects are included in its results and financial
position.The balance with related entities at December 31, 2007 and 2006 follows:
 2007
    
    
    2006Current accounts receivable-Corporación Venezolana del Petróleo, S. A. (CVP)
    
    
    
    
    
    
    3,510PDVSA Petróleo
    
    
    827,884
    
    
    
    425,528Consorcio Petrobrás Energía, S. A.
    
    
    28,215
    
    
    
    Venezuela US, S.R.L.
    
    
    23,086
    
    
    
    879,185
    
    
    
    429,038Current accounts payable-PDVSA Petróleo
    
    
    456,297
    
    
    
    72,249Consorcio Petrobrás Energía  APC  Corod
    
    
    702
    
    
    
    47,153Petrobrás Energía, S. A.
    
    
    28,641
    
    
    
    Venezuela US S.R.L.
    
    
    23,086
    
    
    
    508,726
    
    
    
    119,402Non-current account payable to
PDVSA Petróleo
    
    
    2,933
    
    
    
    15,557
  F-169




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The most significant balances as of December 31, 2007 and 2006 and transactions with related
entities during the year ended December 31, 2007 and for the nine-month period ended December
31, 2006, are summarized as follow:
 2007
    
    
    2006Balances:Recoverable value added tax
    
    
    27,918
    
    
    
    7,545Accounts receivable from stockholders
and related companies
    
    
    879,185
    
    
    
    429,038Accounts payable to stockholders
and related companies
    
    
    508,726
    
    
    
    119,402Non-current account payable to
PDVSA Petróleo
    
    
    2,933
    
    
    
    15,557Income tax payable
    
    
    8,167
    
    
    
    140,538Transactions:Sales of crude oil to PDVSA Petróleo
    
    
    554,312
    
    
    
    425,528Sales of crude oil as payment of production tax,
delivered to PDVSA Petróleo
    
    
    238,828
    
    
    
    182,898Operating expenses
    
    
    41,972
    
    
    
    85,955Sales, administrative and general expenses
    
    
    
    
    
    
    11,009Production and other taxes
    
    
    281,990
    
    
    
    205,864Estimated income tax expense
    
    
    161,742
    
    
    
    140,538Loans received
    
    
    109,214
    
    
    
    
 Accounts receivable from PDVSA Petróleo, related to the sales of crude oil. In addition, the
production corresponding to the rest of the income of Petroritupano, S. A. for the year ended
December 31, 2007 and for the nine-month period ended December 31, 2006 for $238,828 and
$182,898, respectively, was delivered to PDVSA Petróleo for the payment of the production tax
to MENPET, in accordance with that agreed with such ministry (see note 8 (b)).Accounts payable to Consorcio Petrobrás Energía  APC  Corod at December 31, 2007 and 2006,
correspond to disbursements carried out on account of Petroritupano, S. A. for operating
expenses and investments in property, plant and equipment.During the year ended December 31, 2007 and the nine-month period ended December 31, 2006, the
Companys directors have not received any remuneration.(17)
    
    New LawsA summary of laws enacted by the National Government during 2007, with current or future
effects on the Company follows:
 (a)
    
    Law on Science, Technology and InnovationIn August 2005, the Organic Law on Science, Technology and Innovation was promulgated.
Pursuant to this Law, since January 1°, 2006, all large companies in Venezuela shall provide an annual
amount corresponding to 0.5% of their gross income in the national territory to foster
any investment activities in science, technology and innovation. According to this Law,
large companies are defined as companies with annual gross income greater than 100,000
tax units (UT). The Law also establishes that those large companies in the country
engaged in the activities listed in Organic Hydrocarbons and Gaseous Hydrocarbons Laws
shall make annual contributions for an amount equivalent to 2% of their gross income in
the national territory for investment in activities in the areas of science, technology
and innovation. According to information provided by the main stockholder CVP, PDVSA
will centralize the contributions required by this Law.
  F-170




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##### Table of Contents



(b)
    
    Law on Financial Transactions TaxOn October 5, 2007, the National Government promulgated the Decree with Rank and Force of
Law on the Financial Transactions Tax for companies and economic entities without
juridical personality. This Law establishes that these companies and economic entities
shall pay an amount equivalent to 1,5 % of the amount of the financial transactions made.
This Law will be in effect since November 1°, 2007 until December 31, 2008.(c)
    
    Enabling LawOn February 1°, 2007 the National Assembly approved a Law authorizing the President of
the Republic to dictate Decrees with Rank and Force of Law on a set of subjects for
period of 18 months, commencing upon the Laws publication. According to the Law, the
subjects ruled comprised standards concerning eleven areas of the nations life,
including the transformation of the Republics institutions, the peoples participation,
as well as economic, financial, fiscal and energy issues.(d)
    
    Monetary Conversion LawOn March 6, 2007, Official Gazette No 38,638 published the Decree with Rank and Force of
Law on Monetary Conversion, contemplating since January 1°, 2008, a restatement of the
monetary systems unit in Venezuela equivalent to one thousand current bolivars.
Accordingly, the bolivars existing before such date shall be converted into the new
monetary unit (bolivar fuerte), dividing them by one thousand and rounding the decimals
up to the immediate lower or higher number.In compliance with such Law, Petroritupano, S. A. has implemented the technological and
administrative-financial mechanisms to guarantee its compliance, and the Companys
management believes that the processes and cost to implement this new Law will not have
significant effects on the Companys financial statements.
 (18)
    
    Subsequent EventsRecently Issued Accounting StandardsIn January 2008, the IASB issued the revised International Financial Reporting Standard No 3,
Business Combinations(IFRS 3). In addition, the IASB issued an amendment to the International
Accounting Standard No 27 (IAS 27), Consolidated and Separate Financial Statements. These
standards will be in effect for annual periods beginning on, or after July 1°, 2009. The
Companys management is evaluating these standards.(19)
    
    Summary of Differences Between Financial Statements and Accounting RecordssThe amounts in the financial statements as of December 31, 2007, presented in this report,
defer from the amounts shown in the accounting records at such date, due to the fact that
certain adjustments relating to the analysis and recalculation of the Income Tax expense and
certain labor liabilities were recognized after such date. The summary of such adjustments
follows:
 Balances according
    
    
    
    
    
    
    Balancesto accounting
    
    
    Adjustments
    
    
    according torecords
    
    
    debit (credit)
    
    
    this reportBalance sheet -Deferred tax assets
    
    
    111,047
    
    
    
    (8,627
    )
    
    
    102,420Income tax payable
    
    
    10,787
    
    
    
    2,620
    
    
    
    8,167Statement of income -Income tax
    
    
    98,551
    
    
    
    6,007
    
    
    
    104,558
  F-171




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##### Table of Contents



EXHIBIT INDEX ExhibitNumber
    
    Description4.2
    
    Third Amendment to
the Restructuring
Agreement dated as
of March 25, 2008
among Compañía de
Inversiones de
Energía S.A.,
Petrobras Energía
S.A., Petrobras
Hispano Argentina
S.A., Enron
Pipeline Company
Argentina S.A., ABN
AMRO BANK N.V.
Sucursal Argentina,
and AEI.4.4
    
    Loan Agreement,
dated February 14,
2008, between
Petrobras
International
Braspetro BV., as
borrower, and World
Fund Financial
Services, as lender
(English
translation).4.5
    
    Loan Agreement,
dated February 21,
2008, between
Petrobras
International
Braspetro BV., as
borrower, and World
Fund Financial
Services, as lender
(English
translation).4.6
    
    Loan Agreement,
dated February 29,
2008, between
Petrobras
International
Braspetro BV., as
borrower, and World
Fund Financial
Services, as lender
(English
translation).4.7
    
    Stock Purchase
Agreement, dated
December 21, 2007,
between Petrobras
Energía, S.A., as
seller, and
Petrobras
International
Braspetro BV, as
purchaser.8.1
    
    List of
significant
subsidiaries of
Petrobras Energía
as defined in Rule
1-02(w) of
Regulation S-X.12.1
    
    CEO Certification
pursuant to Section
302 of the
Sarbanes-Oxley Act
of 2002, dated June
27, 2008.12.2
    
    CFO Certification
pursuant to Section
302 of the
Sarbanes-Oxley Act
of 2002, dated June
27, 2008.13.1
    
    CEO Certification
furnished pursuant
to Section 906 of
the Sarbanes-Oxley
Act of 2002, dated
June 27, 2008.13.2
    
    CFO Certification
furnished pursuant
to Section 906 of
the Sarbanes-Oxley
Act of 2002, dated
June 27, 2008.